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Retirement, investments, financial planning for every stage of life—learn about it all here at Invested,
a blog from your Wealth Management Advisors at Kirtland Financial Services.

3 Myths About Converting an IRA to a Roth IRA After Age 60

By Kirtland Financial Services


Suppose you have read or watched a story about converting an IRA to a Roth IRA after age 60. In that case, you may have seen this strategy portrayed negatively or only highlighting the benefits. This article will cover myths about converting an IRA to a Roth IRA to help you determine if this strategy is appropriate for you.

First, it is essential that you understand how a Roth IRA works. Roth IRAs are funded with after-tax dollars, and withdraws later are federal tax-free, regardless of how much your investment has gained. Since investors are required to pay taxes on their pre-tax contributions and accumulation in other types of retirement savings vehicles, the Roth IRA is an option that offers a tax-free benefit to qualifying investors.

  • Roth IRAs have income limits– Single people with an adjusted gross income (AGI) under $144,000 and married couples with an AGI under $214,000 for the tax year 2022 can contribute to a Roth IRA in 2022.
  • Roth IRAs have contribution limits- For 2022, Roth IRA limits are $6000 for investors under age 50 and $7000 for investors over age 50.
  • Roth IRAs have no Required Minimum Distribution age (RMD).

Next, we examine some of the myths about IRA to Roth IRA conversions after age 60:

Myth 1: Only people with an AGI under the 2022 Roth IRA limits can do an IRA to Roth IRA conversion.

False. Through a backdoor Roth IRA conversion strategy, investors making more than the Roth IRA limits can convert their IRA to a Roth IRA. Backdoor Roth IRA conversions are beneficial to high earners whose annual income (plus access to workplace retirement plans) makes them ineligible for tax deductions for traditional IRA contributions or unable to contribute to a Roth IRA.

However, investors considering a backdoor Roth IRA conversion need to be aware that the U.S. Congress may pass legislation that would reduce some of its benefits after 2021. The use of Roth IRA conversions by high-income taxpayers would eliminate in 2032 if passed. Therefore, keep in touch with your financial professional for the latest backdoor Roth IRA conversions if you consider this strategy.

Myth 2: Roth IRA accounts have taxes due on withdrawals.

False. Taxes are due upon the conversion of the IRA to a Roth IRA, so taxes are paid upfront. A Roth IRA conversion may incur higher taxes when established, but the investor will receive the future tax savings of a Roth IRA account.

For this reason, it is essential that you meet with your financial and tax professionals to determine what your tax liability will be upon conversion. Also, note that taxes are not deducted from the IRA’s balance before conversion, which means you must pay taxes upfront in cash.

Myth 3: Roth IRA accounts have to be open for five years before taking withdrawals, or you pay taxes.

False. If you don’t meet the five-year rule, that doesn’t mean all of your withdrawals will be taxed. You can still withdraw the amounts you contributed without being taxed because your money was an after-tax contribution upon conversion and falls under the first-in, first-out (FIFO) basis. So any withdrawals made come from contributions first. Therefore, no earnings will be considered touched until all contributions are withdrawn.

What else should investors over age 60 know about IRA conversions?

  • A Roth IRA conversion strategy may make sense if the person believes they will be in a higher tax bracket in the future and will save money by paying taxes now rather than later.
  • For investors over age 60, a Roth IRA conversion may be a strategy to help lower estate taxes for their heirs.
  • If an investor over age 60 doesn’t need the money from their Roth IRA, they don’t need to take RMDs.
  • Roth conversions completed after Dec. 31, 2017, cannot be turned back into traditional IRAs, as was previously the case.
  • A Roth IRA conversion is a strategy for assets initially contributed to a Traditional IRA, SEP-IRA, SIMPLE IRA, or 401(k) that is now in a Roth IRA after an IRA conversion.
  • An IRA conversion may incur higher taxes when established, but the investor will receive the future tax savings of a Roth IRA account.

Are you considering a Roth IRA conversion?

We can help you determine if a Roth IRA conversion is appropriate for your situation and help you weigh the pros and cons of this strategy. Contact us today.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

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