Roth 401(k) Conversion Guide
Convert Traditional 401(k) to Roth and pay taxes now for tax-free growth
A Roth conversion lets you move pre-tax retirement funds into a Roth account, paying taxes now in exchange for tax-free withdrawals in retirement. This can be a powerful strategy if you expect to be in a higher tax bracket later.
What Is a Roth Conversion?
A Roth conversion involves transferring money from a Traditional 401(k) or IRA to a Roth account. You pay income taxes on the converted amount in the year of conversion, but all future growth and qualified withdrawals are tax-free.
The 5-Year Rule
Converted funds must remain in the Roth account for at least 5 years before the earnings can be withdrawn tax-free. Each conversion has its own 5-year clock.