What are the disadvantages of a Roth IRA conversion?

  • You may have to pay income taxes now on conversion amounts that were previously deducted from your income. Betterment will not withhold these funds for you.
  • The taxable portion of a converted amount will be added to your adjusted gross income for the year, and could potentially increase your tax bracket overall.
  • Taxpayers with incomes or an adjustable gross income (AGI) over $200,000 who file individually, or $250,000 for married couples filing jointly, could be subject to a 3.8% tax on income from interest, dividends, annuities, royalties and rents which are not derived in the ordinary course of trade or business. Exceptions apply. Read more about the tax.
This article is intended for educational purposes only. The information provided is educational in nature, and is not intended to be relied upon as financial or tax advice. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. When deciding whether to roll over a retirement account, you should carefully consider your personal situation and preferences. The information on this page is being provided for general informational purposes and is not intended to be an individualized recommendation that you take any particular action. Factors that you should consider in evaluating a potential rollover include: available investment options, fees and expenses, services, withdrawal penalties, protections from creditors and legal judgments, required minimum distributions, and treatment of employer stock. Before deciding to roll over, you should research the details of your current retirement account and consult tax and other advisors with any questions about your personal situation.