As the calendar winds down, some investors may be eyeing Roth individual retirement account conversions , depending on long-term goals. Experts say there's good reason that now is the season for Roth conversions, with some exceptions.
The strategy transfers your pretax or nondeductible IRA funds to a Roth IRA to kickstart future tax-free growth. But the trade-off is you'll owe upfront taxes on the converted balance.
Roth conversions are popular among younger retirees because they can often convert funds in lower income tax brackets than during their working years. Plus, earnings are typically reduced for retirees before claiming Social Security and starting required withdrawals .
There's a reason year-end Roth conversions are popular: The strategy requires precise curren