Dan Celia

Financial Issues

March 2015 – Q: I have often heard you speak about starting to transfer some of our traditional IRA or 401K money to a Roth IRA. Can I continue to do this forever or only if I have earned income? Also, what are the advantages of a Roth IRA?

A: Yes, you can continue to convert your 401K or traditional IRA to a Roth IRA. But keep in mind that once you are 70½, your minimum retired distribution will have to be taken from your Traditional IRA and you will have to pay taxes on that. You cannot take the money, roll it into a Roth IRA and not pay the tax. Of course, one of the biggest benefits is that all the growth in the Roth IRA will continue to happen tax free. 

The other advantage – the one I value most – is that upon death, the Roth account can be transferred to a child or any beneficiary, and they will not have to pay taxes on it, or on its distributions. It can continue to grow tax free. 

Ultimately, everyone should consider moving money regularly from their traditional IRA to a Roth IRA or savings account.
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Dan Celia has been in financial management for more than 30 years. He works closely with AFA Foundation and can be heard six days a week on AFR Talk (afr.net).

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Email: dan@financialissues.org