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Pros and Cons of Converting Your IRA to a Roth

In this edition of our Motley Fool Conversations series, Fool personal finance expert Dayana Yochim and retirement planning analyst Dan Caplinger discuss whether converting traditional IRAs and 401(k) plans to their Roth counterparts is a smart move. Although you pay taxes up front on a conversion, the payoff is that you never have to pay taxes on your Roth assets again -- even when you take withdrawals during retirement.

Dan and Dayana go through the pros and cons of doing a Roth conversion with some specific ideas on helping you make the right decision for your own personal financial situation. In addition, Dan points out how you can take advantage of special "do-over" provisions of Roth IRA conversions in order to maximize your returns in stocks facing big binary events that will make or break their futures. Overall, whether converting makes sense depends on what your current tax rates are compared to what you expect they'll be when you retire.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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Related Tickers

10/31/2014 3:59 PM
ARNA $4.36 Down -0.09 -2.02%
Arena Pharmaceutic… CAPS Rating: ***
VVUS $3.39 Up +0.04 +1.04%
VIVUS, Inc. CAPS Rating: **

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