Q. I know that after I reach age 70½ the government will require me to start making withdrawals from my traditional IRA. Can I convert it to a Roth IRA to avoid this?
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A. Yes, you could convert the account to a Roth IRA and pay income tax now but avoid distribution requirements in retirement.
The primary difference between a traditional IRA and a Roth IRA comes down to this: take your tax deductions today or enjoy tax-free income in retirement.
In a traditional IRA, your contributions are tax-deductible. So if your income is $30,000 annually, and you contribute $5,000, you will be taxed on only $25,000 in income. After you hit 70½, you will pay taxes on withdrawals that are mandatory each year.
With a Roth IRA, you'll pay taxes on $30,000 in income regardless of your contribution amount. However, you would not be required to take annual distributions in retirement — when to withdraw would be your decision.
To determine which strategy is best for you, consult a tax adviser.