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What are the Benefits of Converting to a Roth IRA?

 
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You may want to consider converting some or all of your Traditional IRAs into a Roth IRA to take advantage of its long-term, tax-free benefits. Keep in mind, however, that upon conversion, you will owe income taxes on your investment earnings and on any deductible contributions made to your Traditional IRA.

When is it a good idea to consider converting an existing IRA to a Roth IRA?

A conversion may be advantageous if:

  • You can afford to pay the taxes due on the conversion from a source other than your IRA;
  • You want to avoid taking minimum distributions when you reach age 70½; and
  • You expect to be in the same or a higher tax bracket when you withdraw your money.

The reason? By converting your assets to a Roth IRA, you'll be paying your tax liability now - at a potentially lower rate-in exchange for tax-free growth and tax-free distributions in the future.

What are eligible contributions?

Filing Status Adjusted Gross Income Eligibility for a $5,000 contribution1
Single Up to $107,000 Full Amount
$107,000 - $122,000 Partial
Over $122,000 No contributions permitted
Married, filing jointly Up to $169,000 Full Amount
$169,000 - $179,000 Partial
Over $179,000 No contributions permitted

1 Taxpayers age 50 and older can make an additional "catchup" contribution to their IRA of $1,000.

 

IRS CIRCULAR 230 NOTICE: This information is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. For more information about this notice, see northerntrust.com/circular230.
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Not FDIC insured | May lose value | No bank guarantee

An investment in Northern Funds is not insured by the FDIC, and is not a deposit or obligation of, or guaranteed by The Northern Trust Company or any affiliate. An investment in Northern Funds involves risks, including possible loss of principal.

Please carefully read the prospectus and summary prospectus and consider the investment objectives, risks, charges and expenses of Northern Funds before investing. Call 800-595-9111 to obtain a prospectus and summary prospectus, which contains this and other information about the funds.

Shares of the Northern Funds are offered only by a current Prospectus and are intended solely for persons to whom shares of US registered funds may be sold. This site shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of shares of the Northern Funds in any jurisdiction in which such offer, solicitation or sale would be unlawful.

©2014 Northern Funds | Northern Funds are distributed by Northern Funds Distributors, LLC, not affiliated with Northern Trust.