Better to transfer into Roth IRA or keep traditional IRA?

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Topic Author
sociologydude76
Posts: 53
Joined: Tue Jul 18, 2017 10:36 am

Better to transfer into Roth IRA or keep traditional IRA?

Post by sociologydude76 »

Hello Bogleheads!

My partner recently found they had some money floating in an old traditional IRA (money market) and would like to move it into a Roth IRA on Vanguard into a fund. Would it make the most financial sense to move the money from the traditional IRA on the old brokerage into a traditional IRA on Vanguard and then convert the traditional IRA into a Roth? Or would it be easier to just keep a traditional IRA and also have a Roth IRA separately.

Thank you so much!
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

Re: Better to transfer into Roth IRA or keep traditional IRA?

Post by sawhorse »

It depends.

What is your tax bracket? If you transfer the traditional IRA into a Roth IRA, you have to pay taxes on the entire amount now as if you earned it all this year. Then you don't have to pay taxes when you withdraw the money after age 59.5.
Topic Author
sociologydude76
Posts: 53
Joined: Tue Jul 18, 2017 10:36 am

Re: Better to transfer into Roth IRA or keep traditional IRA?

Post by sociologydude76 »

sawhorse wrote: Sun Apr 18, 2021 10:51 pm It depends.

What is your tax bracket? If you transfer the traditional IRA into a Roth IRA, you have to pay taxes on the entire amount now as if you earned it all this year. Then you don't have to pay taxes when you withdraw the money after age 59.5.
Thank you for the reply! They are in the 22% bracket and will likely be in a larger bracket in the future.
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

Re: Better to transfer into Roth IRA or keep traditional IRA?

Post by sawhorse »

sociologydude76 wrote: Sun Apr 18, 2021 10:57 pm Thank you for the reply! They are in the 22% bracket and will likely be in a larger bracket in the future.
In that case, converting it to a Roth is probably a wise move as long as you can afford the tax bill for this year.
Topic Author
sociologydude76
Posts: 53
Joined: Tue Jul 18, 2017 10:36 am

Re: Better to transfer into Roth IRA or keep traditional IRA?

Post by sociologydude76 »

Okay thank you!
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