When Does a Roth Conversion Make Sense?

With a traditional IRA, you may qualify for a tax deduction when you invest your money. But later, when you take the money out in retirement, all those distributions are taxed. The Roth IRA is the opposite. It has no deduction when you put the money in, but later, all distributions are tax-free when you take the money out during retirement.

By converting from a traditional IRA to a Roth IRA, future gains become tax-free. But when you convert funds from a traditional IRA to a Roth IRA, you must pay taxes on the converted amount that year.