Does a Roth Conversion Make Sense Right Now?
Making regular contributions to tax-advantaged retirement accounts is one of the most effective ways to build financial security over the long run. Given the current state of global stock markets, it's natural to rethink how you can get the most out of your 401(k)s and IRAs once you've built up healthy balances. A popular strategy is the Roth conversion.
Here, we'll briefly review what a Roth conversion is, how one would play out in reality, and if now is the right time to move ahead with one.
Most people fund their retirement through traditional 401(k)s or IRAs, which usually provide a tax deduction at the time of contribution. These accounts function as tax-deferred accounts; in other words, you trade paying tax today for the obligation to pay at some point in the future (when money is withdrawn or converted.) Along the way, you receive tax-deferred growth, which can help accelerate the effects of compound interest.
Source Fool.com
