Financial Learning Center
- What Initiates a Distribution?
- Five Dates You Should Know
- Selecting a Distribution Option
- Deciding on a Payout Option
- Annuity Form of Payout
- Advantages and Disadvantages of Taking an Annuity
- Taking a Lump-Sum Distribution: Know Your Options
- Annuity vs. Managing Your Own Retirement Assets
- Advantages and Disadvantages of a Lump-Sum Distribution
- The Roth IRA–How Does It Fit In?
- Making the Decision: Annuity or Lump-Sum?
- Taxation of Distribution Options
- Rollover into a Traditional IRA
- Advantages and Disadvantages of Rollover to a Traditional IRA
- Annuity Payouts
- Early Distributions
- Should You Defer Your Retirement Plan Distribution as Long as Possible?
- Distributions Following Death
If you are eligible to establish a Roth IRA, you will need to consider if you should roll over your qualified retirement plan money into a traditional IRA and then convert it to a Roth IRA. The analysis is quite complicated and the assumptions regarding your tax bracket before and after retirement will drive the result.
For example, if you estimate that your current tax bracket will be the same as your tax bracket in retirement, it may make sense to convert a traditional IRA to a Roth IRA upon rolling over the qualified retirement money into the traditional IRA.
If, on the other hand, you are currently in a high tax bracket (say 33%), and you estimate your bracket in retirement to be much lower (say 15%), then it may not make sense to convert the traditional IRA to a Roth IRA. See the section Converting a Traditional IRA to a Roth IRA. If you qualify to establish a Roth IRA and are considering rolling your qualified retirement plan money into an IRA, contact your tax professional to help you with a more detailed analysis.
IMPORTANT NOTE: For conversions occurring after 2010, the federal income taxes must be paid in full the following tax year going forward. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. An investor should carefully consider the source of funds used to pay the taxes owed on a Roth conversion. Penalties and taxes may apply if the investor uses money from the IRA as the source for conversion taxes. Consult a tax professional for details.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA (Opens in a new Window)/SIPC (Opens in a new Window). UniVest Financial Services is a trade name of UniBank. Infinex and UniBank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of, nor guaranteed or insured by, any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.