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You might have heard of a Roth individual retirement account (IRA). A Roth IRA is different from a traditional IRA in a few key ways, from the potential for tax-free growth to the absence of required minimum distributions.

But even if you’re familiar with a Roth IRA, you may not have heard of a Roth IRA conversion. Let’s dig in more to this option so you can figure out if it might work for you—now or in the future.

A quick refresher on the benefits of a Roth IRA

Roth IRA contributions are made with dollars you’ve already paid taxes on—thus the reason they’re often referred to as after-tax retirement savings accounts. (To open a Roth IRA, you must meet annual contribution and income limits.) When you want to withdraw funds from your Roth IRA, you’ll owe no taxes—not even on growth—as long as you . And you can also make withdrawals at any time after you reach age 59½ as long as the account is over five years old.

So what is a Roth IRA conversion?

A Roth IRA conversion is moving money from a pre-tax account, such as a traditional IRA, to a Roth IRA and paying taxes on those funds right away. These are sometimes referred to as backdoor IRAs or super Roths. (See below for why.) You can complete a Roth IRA conversion before or during retirement.

Why would I want to do a Roth IRA conversion?

There are a couple of reasons a Roth IRA conversion may fit into your retirement and financial goals.

• You’ve been saving in a pre-tax account and want to diversify.  Just be prepared to pay the tax bill now.
• You anticipate that you will be in a higher income tax bracket and don’t want to foot that bigger tax bill in your post-work years.
• You want to pass money onto loved ones without a tax burden. Typically, beneficiaries receive Roth IRA funds tax free.
• You have unused funds in a qualified 529 plan. .
• You exceed the income limitations for a new Roth IRA. (Remember: Anyone can open and contribute to a traditional IRA, but only people who meet income and contribution limits can open a Roth IRA. A Roth IRA conversion doesn’t share those limitations.)
• You want more flexibility in the amount you withdraw in retirement. Because Roth IRAs have no required minimum distributions, or RMDs, you can take out as little (or as much) as you want.

How do you complete a Roth IRA conversion?

A Roth IRA conversion process is similar to any retirement savings rollover. You will have to complete some paperwork and direct where the funds go. And, you choose whether to convert some or all of the funds.

What are some considerations for a Roth IRA conversion?

It’s helpful to talk with both your financial professional and tax advisor to review impacts and timing. Those considerations include:

• You’ll pay income taxes on converted funds immediately instead of in retirement. Do you have enough to cover the taxes without dipping into your retirement savings?
• You may want to consider when you need the funds from the Roth IRA: A Roth IRA must be five years old and you must be over age 59½ to withdraw funds penalty free. Early withdrawals incur a 10% charge.
• A Roth IRA conversion could increase your expected financial contribution on the Free Application for Federal Student Aid, or FAFSA, because distributions are reported as income. That could impact any total college tuition bills you are expected to pay.
• If you are leaving retirement funds to a charity, you won’t pay taxes on them. So a conversion simply creates a bill you don’t need to pay.

Again, it’s a complex decision and consulting tax and financial professionals helps you understand the impact of IRS rules and timing, particularly as it fits into your overall financial goals.