If you have made deductible contributions to a traditional IRA, that money will have to come out eventually. You’ll owe tax on the withdrawals, at whatever tax rates are in effect in the future.
By comparison, Roth IRA contributions are not deductible. However, all withdrawals are tax-free, after you’ve had the account for five years and you’ve reached age 59-1/2.
Therefore, you might want to convert your traditional IRA to a Roth IRA. The catch is that such conversions will trigger the tax on previously deductible contributions and on the IRA earnings. If you are in a 25% tax bracket, for example, converting a $50,000 IRA could cost you $12,500 in tax, or even more if the $50,000 addition to your income moves you into a higher tax bracket.
Instead, consider a series of partial contributions. With a $50,000 traditional IRA, consider converting $10,000 a year for five years. The added tax would probably be $2,500 a year, in this example. By the time your account is fully converted to a Roth IRA, you would be past the five-year mark so all withdrawals will be tax-free once you reach age 59-1/2.
