Roth conversions allow you to pay taxes now instead of having to pay them later. This is often a wise choice, especially if you think your personal tax rate or tax rates in general will increase in the future. A Roth conversion is simply the process of taking funds from a Traditional or tax-deferred IRA and moving them to a Roth IRA.
Before, performing a conversion you should speak with your advisor and or tax professionals, because it is a taxable event and isn’t right for everyone. Though conversions are easier than ever to implement, if you are a client of Tines Capital, we highly recommend you let us walk you through the process and give our recommendation. Below is a guide of how Roth conversions are performed at Interactive Brokers.
1. GO TO IRA CONVERSION
Login to IBKR.com and navigate to the account settings section of your non-Roth IRA, by clicking on the icon of a person on the upper right followed by “account settings.” Make sure you have selected your non-Roth IRA. This can be a Traditional IRA, Rollover IRA, or SEP IRA. Then go to IRA Conversion setting by clicking the corresponding gear icon.
2. FOLLOW THE STEPS
From here you will follow the prompts to verify that it is you and declare how much you want to convert from a Traditional IRA to a Roth IRA. After you do this the Traditional IRA will remain open as long as you maintain a funded Roth IRA.
3. Should You withhold taxes
By not withholding taxes you will increase the amount of money you can move into a Roth IRA. Therefore, it is usually best to not withhold taxes and instead pay the tax bill caused by the conversion using income or funds in a checking, savings, taxable investment account, or some other source.