Since its 1997 inception until 2009, you couldn’t convert from a Traditional IRA to a Roth IRA if your modified adjusted gross income was more than $100,000. Starting in 2010, that limitation is abolished, and investors at any income level can convert. In addition, there's a special rule in place for 2010 only that will allow you to split any tax liability equally between the next two tax years (2011 and 2012).
Converting your Traditional IRA to a Roth IRA might be a good plan if you:
- think you will be in the same or a higher tax bracket when you begin withdrawals.
- have a long time horizon until retirement.
- don’t need to use the money and want to leave a potentially income-tax-free Roth IRA to your heirs for gift and estate-planning purposes.
- are able to pay the taxes on the conversion from a separate pool of funds.
Below is an overview of the features of Traditional IRAs and Roth IRAs:
| |
Traditional IRA |
Roth IRA |
| Tax deductible? |
Yes, up to certain income levels |
No |
| Mandatory distribution age |
Age 70 1/2 |
No mandatory age |
| Taxes on earnings |
When money is withdrawn |
Potentially no tax on earnings* |
| Types of investments |
Mutual funds, certificates of deposits, stocks, annuities |
Same as Traditional IRA |
| Income restrictions |
Any income level |
Married/filing jointly: Up to $167,000 in earned income; Single: up to $105,000 in earned income* |
| Penalty for early withdrawal |
10% federal tax penalty for withdrawals before age 59 1/2 |
Contributions can be withdrawn with no penalty, earnings are subject to a 10% federal penalty for withdrawals before age 59 1/2 * |
*There are several exceptions and qualifications. Failure to meet the requirements for a tax-free distribution (account funded for five years and withdrawal of earnings made after age 59 ½) could result in taxes and penalties. Check with your financial or tax adviser about your situation.
GuideStone Funds has both Traditional and Roth — choose from among 19 funds; most of the funds available in our workplace retirement plans are also available for IRAs. And, GuideStone Funds doesn’t invest in companies that are publicly recognized as being in the liquor, tobacco, gambling, pornography or abortion industries.
IRA and Roth IRA tools
GuideStone has IRA specialists who guide you through IRA options and help you determine if a Roth conversion is right for you. Call us at 1-888-98-GUIDE (1-888-984-8433).
Try the Roth IRA vs. Traditional IRA calculator.
More information about all GuideStone IRAs.
| You should carefully consider the investment objectives, risks, charges and expenses of GuideStone Funds before investing. For a copy of the prospectus with this and other information about the funds, please download a prospectus or call 1-888-98-GUIDE (1-888-984-8433). You should read the prospectus carefully before investing. |
IRAs made available through GuideStone Financial Services, member FINRA.