search results
 
showing 1 -    
Investments - for Financial Advisors 

Retirement Planning

Converting a Traditional IRA to a Roth IRA

Converting a Traditional IRA to a Roth IRA can provide a number of benefits. The conversion is taxable, but investments grow tax-free after that, and there are no taxes on qualified withdrawals. Traditional IRA holders may be able to convert these assets to a Roth Conversion IRA, in which future earnings and withdrawals can be tax-free.

Who Is Eligible to Convert to a Roth IRA?

Before 2010, only people with Modified Adjusted Growth Income (MAGI) of $100,000 or less in the year of the conversion could convert Traditional IRA assets to a Roth IRA. The limit applied to individuals and couples. Married couples filing separately weren't eligible.

Starting in 2010, the $100,000 MAGI limit and the filing status requirement have been eliminated—any Traditional IRA holder can convert to a Roth IRA.

Paying Taxes on Conversions

  • You must pay income tax on any deductible contributions or earnings.
  • It may be more advantageous to pay the taxes due on the conversion amount out-of-pocket rather than tapping your retirement account.

If you withdraw money from your Roth Conversion IRA prior to age 59½ and haven't held the Roth Conversion IRA for five years, a 10% IRS early distribution penalty applies (with some exceptions, including your disability).

Partial Conversion

If converting all of your Traditional IRA assets to a Roth IRA creates a significant tax liability, consider converting only a portion of those assets to make the taxes easier to handle.

You Might Want to Consider Converting If:
  • You expect to be in the same or higher tax bracket during retirement and won't be withdrawing your money for a while.
  • You can pay the conversion tax out-of-pocket instead of dipping into your retirement account.
  • You're almost 70½ and don't want to take mandatory distributions from your Traditional IRA.
  • Your Traditional IRA contributions were nondeductible.
  • For estate planning purposes, you'd like to pay taxes now to reduce your taxable estate.
You Might Not Want to Consider Converting If:
  • You expect your tax bracket after retirement to be lower.
  • You don't have extra money to pay the taxes and would have to use your IRA assets.
  • Conversion would push you into a higher tax bracket.
  • You may need your money before your Roth Conversion IRA has been open for five years.
 


Investors should consider the investment objectives, risks, charges and expenses of the Fund/Portfolio carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, click here or contact your AllianceBernstein Investments representative. Please read the prospectus and/or summary prospectus carefully before investing.


AllianceBernstein Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.


AllianceBernstein mutual funds may be offered only to persons in the United States and by way of a prospectus. This website should not be considered a solicitation or offering of any investment products or services to investors residing outside of the United States.


Investment Products Offered:

Are Not FDIC Insured | May Lose Value | Are Not Bank Guaranteed

AllianceBernstein® and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.