How to Convert a Traditional IRA to a Roth IRA

What happens when you convert a traditional IRA to a Roth

A conversion moves money from your traditional IRA into a Roth IRA. You pay income tax on the amount you convert in that tax year, then the money grows tax-free in the Roth account. After conversion, you follow Roth rules: you can withdraw earnings tax-free after age 59½ and after the account has been open for five years, and you are not required to take withdrawals at any age during your lifetime.

The conversion itself is a one-time transaction. You direct your IRA custodian (the bank or brokerage holding your account) to move the funds. The IRS does not need your permission in advance. You report the conversion on your tax return for that year, and that is when you owe the tax.

Conversions are permanent. Once money is in the Roth, you cannot move it back to a traditional IRA (though you can undo a conversion within a narrow window if you file an amended return, a process called a recharacterization, but this is rare and has strict rules).

Key Takeaways

You can convert any amount from a traditional IRA to a Roth IRA at any time, but you must pay income tax on the full amount converted in that tax year.
The conversion process takes one phone call or online request to your IRA custodian and usually completes within one to two weeks.
If you have multiple traditional IRAs, the IRS treats them as one account for tax purposes when calculating how much tax you owe on a conversion.
Conversions make sense when you expect to be in a lower tax bracket now than in retirement, or when you want to reduce required withdrawals later.
You can undo a conversion by filing an amended tax return within a set deadline, but this is uncommon and has strict requirements.

The tax bill you owe when you convert

The amount of tax depends on how much of your traditional IRA is made up of pre-tax contributions versus after-tax contributions. If you contributed money to your traditional IRA and deducted it from your taxes, that money is pre-tax. If you contributed money and did not deduct it, that money is after-tax.

When you convert, only the pre-tax portion is taxable. The after-tax portion is not. The IRS uses a formula called the pro-rata rule to figure out what percentage of your conversion is pre-tax. If you have $100,000 in traditional IRAs total, and $20,000 of that is after-tax contributions, then 80 percent of any conversion is taxable.

You owe the tax in the year you convert. If you convert $50,000 in January, you report that $50,000 (or the taxable portion of it) as income on your tax return for that year. The tax you owe depends on your tax bracket. If you are in the 24 percent federal bracket, a $50,000 conversion adds roughly $12,000 to your tax bill (before accounting for state tax or the pro-rata rule).

You can pay the tax from the converted funds themselves, or from other money you have. Many people pay from outside the IRA so more money stays in the Roth account to grow.

How to request a conversion from your IRA custodian

Contact the bank, brokerage, or financial institution that holds your traditional IRA. Tell them you want to convert the account or a portion of it to a Roth IRA. You can do this by phone, online portal, or in writing. Most custodians have a form for conversions.

You will need to provide the amount you want to convert (or request a full conversion of the entire account). If you do not already have a Roth IRA with the same custodian, they will open one for you. The custodian will move the funds from the traditional IRA to the Roth IRA, usually within one to two weeks.

Some custodians allow you to convert directly from one account to another without the money passing through your hands. This is called a trustee-to-trustee transfer. Other custodians may send you a check, which you then deposit into the Roth IRA within 60 days. Ask your custodian which method they use.

Keep records of the conversion. Your custodian will send you a Form 1099-R (a tax form reporting the distribution) and a Form 5498 (reporting the contribution to the Roth). You will need these when you file your tax return.

Partial conversions and converting over multiple years

You do not have to convert your entire traditional IRA at once. You can convert part of it now and part of it later, or convert different amounts in different years. Each conversion is a separate taxable event.

Some people convert a small amount each year to spread the tax bill across multiple years and stay in a lower tax bracket. For example, if converting $50,000 would push you into a higher bracket, you might convert $20,000 this year and $20,000 next year instead.

If you have multiple traditional IRAs, the pro-rata rule applies to all of them together. You cannot convert one IRA that is all after-tax contributions and leave another IRA untouched to avoid the pro-rata rule. The IRS treats all your traditional IRAs as a single account for this calculation.

The pro-rata rule and why it matters

The pro-rata rule prevents you from converting only the after-tax portion of your traditional IRAs and leaving the pre-tax portion behind. Here is how it works: the IRS adds up all your traditional IRAs, SEP IRAs, and SIMPLE IRAs as of December 31 of the year you convert. It calculates what percentage is pre-tax and what percentage is after-tax. That same percentage applies to your conversion.

Example: You have $80,000 in a traditional IRA (all pre-tax) and $20,000 in a traditional IRA that you funded with after-tax contributions. Total: $100,000. You want to convert the $20,000 after-tax IRA to a Roth. The pro-rata rule says 80 percent of that $20,000 ($16,000) is treated as pre-tax and taxable. Only $4,000 is after-tax and tax-free.

This rule applies even if the after-tax IRA is at a different custodian. The only way to avoid the pro-rata rule is to move all pre-tax money out of your traditional IRAs before you convert. Some people do this by rolling pre-tax IRAs into a workplace 401(k) plan (if their employer allows it), then converting the after-tax IRA. This is called the "pro-rata workaround," but it requires that your 401(k) plan accepts rollovers.

When a conversion makes financial sense

A conversion is often worth considering if you are in a lower tax bracket now than you expect to be in retirement. If you are between jobs, took a year off, or had a low-income year, converting during that year means you pay tax at a lower rate than you would later.

Conversions also help if you want to reduce the required withdrawals you must take from traditional IRAs after age 73. Roth IRAs have no required withdrawals during your lifetime, so converting money to a Roth lowers the amount you must withdraw from traditional accounts, which can keep you in a lower tax bracket in retirement.

A conversion can also make sense if you expect tax rates to rise in the future, or if you want to leave tax-assistance programs to heirs. Roth accounts pass to beneficiaries tax-free (though beneficiaries must withdraw the money within ten years under current rules).

Conversions are usually not worth doing if you are in a high tax bracket now and expect to be in a lower one in retirement, or if you will need the money within five years (since you cannot withdraw Roth earnings tax-free until five years have passed).

Frequently Asked Questions

Can I undo a conversion after I have already done it?

Yes, but only within a limited time frame. You can file an amended tax return to undo a conversion, but you must do this by the tax filing deadline for that year (usually April 15, plus extensions). This is called a recharacterization. After that deadline, the conversion is permanent. Recharacterizations are rare and require specific paperwork.

What if I convert and then the market drops before I pay the tax?

You still owe tax on the amount you converted, based on the value when you converted, not the current value. If you converted $50,000 and it is now worth $40,000, you still owe tax on $50,000. This is one reason some people wait to convert until after a market drop, or convert smaller amounts over time.

Do I have to convert my entire traditional IRA at once?

No. You can convert part of your traditional IRA and leave the rest untouched. Each conversion is separate. However, the pro-rata rule applies to all your traditional IRAs together, so converting part of one does not let you avoid the rule.

What happens to my required minimum distributions if I convert?

Converting to a Roth does not change your required minimum distribution for the year you convert. You must still take your required withdrawal from any remaining traditional IRA balance. However, after conversion, you have no required withdrawals from the Roth account during your lifetime, which can lower your overall required withdrawals in future years.

Can I convert if I have a workplace 401(k) plan?

Yes. Having a 401(k) does not prevent you from converting a traditional IRA to a Roth. However, if you have a 401(k), the pro-rata rule still applies to all your traditional IRAs when you calculate the tax on a conversion. Some people roll their pre-tax 401(k) into a traditional IRA before converting, which can complicate the pro-rata calculation.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.