How to Move Retirement Money From a Traditional IRA to a Roth IRA

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    Switching to a Roth IRA

    • 1). Decide where you want to invest. Many people convert their IRA to a Roth IRA for the additional tax benefits, but this is also an opportunity to reallocate your IRA into new funds or investments. If your current IRA is underperforming, you can move your funds into a different IRA. If you are much closer to retirement since the last time you reallocated your fund, you can move more of your account into bond funds. The only thing you really shouldn't consider investing your Roth IRA in is tax-free bonds of mutual funds, because you are already going to receive that benefit through your Roth IRA. Also, look for a Roth IRA administrator that has low maintenance fees.

    • 2). Contact the administrator that you want to hold your Roth IRA. Ask for the form to convert your IRA to a Roth IRA. If you are changing administrators, ask for the paperwork to roll over your IRA and convert it to a Roth IRA.

    • 3). Fill out the paperwork. The paperwork will differ from somewhat from company to company, but it generally asks for current account information and where you want the funds invested. It will also verify that you are converting your account from a traditional IRA to a Roth IRA. It is usually a fairly simple process, but if your administrator offers help with it, take it. The administrator can smooth out the transfer of funds and help you administer any tax liability.

    • 4). Pay the taxes on any earnings and pretax contributions. You enter the amount as an taxable IRA distribution on your Form 1040.

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