The Roth IRA is one of the best retirement accounts available. It offers you tax-free withdrawals in retirement, the opportunity to invest without having to consider most investment-related taxes, and the ability to keep your money within the shelter of the account for your entire life. In addition, you can roll money from your traditional-style retirement accounts into your Roth IRA, pay a one-time tax on the conversion, and then let the money compound tax-free for your retirement.

To get the most out of you Roth IRA, you should understand the specifics of how those accounts work. That way, you can take advantage of your Roth IRA to help you optimize your overall retirement plan. These three smart Roth IRA moves will get you moving in the right direction.

Road sign similar to an interstate highway sign, with the word "ROTH" inside it where the route number usually goes.

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No. 1: Keep track of your contributions and conversions

Keeping track of how much you contributed to your Roth IRA, how you contributed that money, and when you contributed it is one of the smartest Roth IRA moves you can make. It's absolutely vital if you think you might tap some of your Roth IRA money before you turn 59 1/2 and would otherwise generally qualify for tax-free withdrawals.

You can withdraw money that you directly contribute to your Roth IRA at any time for any reason, with absolutely no tax or penalty on that money. If you got money into your Roth IRA by converting it from a traditional IRA or traditional 401(k) plan, that conversion needs to sit inside your Roth IRA for at least five years before you can withdraw it without a 10% penalty. (That requirement for the conversion to sit in your Roth IRA for at least five years before withdrawing it applies only if you're under age 59 1/2). 

In addition, even if you're above 59 1/2, you must have made your first Roth IRA contribution at least five years before withdrawing the money for the earnings to come out of your account tax free.

No. 2: Convert early to lower your taxes and other costs later

Paper with "IRA" "Traditional" and "Roth" typed on it. Roth is circled in red.

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The biggest challenge with a traditional IRA and a traditional 401(k) in most cases is that once you reach age 70 1/2, you have to start taking withdrawals from the account. Those withdrawals generally add to your taxable income -- whether or not you need the money to cover your costs of living.

If your income gets high enough, up to 85% of your Social Security check can be subject to income taxes. In addition, if your income gets high enough, your Medicare Part B premiums can increase -- from the standard rate of $134 per month to as high as $428.60 per month. 

Your required minimum distribution increases as a percentage of your traditional IRA and traditional 401(k) balance each year between age 70 1/2 and age 115. On top of that, the money remaining in your account can still grow, which would give you an even larger balance to base that mandatory distribution on in the next year. That combination can quickly escalate your taxable income -- and the related taxes and Medicare costs -- in retirement, even if you don't plan to spend the money.

Roth IRAs are not subject to mandatory distributions for the original owners. By converting at least part of your traditional IRA and traditional 401(k) plan balances to a Roth IRA earlier, you cut down on the money subject to those escalating required distributions.

You do pay income tax on the amount you convert, but note that you don't have to convert your entire balance at once. A popular strategy people follow is to convert enough each year to "top off" the 15% or 25% tax bracket either while they're working or early in their retirements. If the combination of Social Security plus required minimum distributions would otherwise put you in the 28% tax bracket or above, it's a way to pay some tax now to avoid more taxes later.

No. 3: Consider a "back-door Roth IRA" if you can't directly contribute to one

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If your income is too high to directly contribute to a Roth IRA, but you're still working and young enough to contribute to a traditional IRA, you might be able to get money into your Roth IRA through this "back door." To take advantage of the back-door Roth IRA technique, you contribute to a traditional IRA and then convert that contribution to your Roth IRA account. 

To make the back-door Roth IRA nearly equivalent to directly contributing to a Roth IRA, you should either be able to deduct your traditional IRA contribution or have no existing traditional IRA balance. If that's true, at the end of the process, you'll have money in your Roth IRA that you contributed that year and paid taxes on. Since it's a rollover contribution, you can't withdraw it if you're under age 59 1/2 until it has sat in your account for five years, but it does get your contribution into your Roth IRA.

In the event that you have an existing traditional IRA balance and you cannot deduct your traditional IRA contribution, you can still execute the back-door Roth IRA technique, but it will probably cost you more. That's because you'll pay taxes on the money you use for the non-deductible contribution, and then you'll probably pay taxes on your conversion as well. The rules on IRA conversions require you to consider your total balance across all your traditional IRAs in relation to your contribution tax basis when converting to a Roth IRA.  

For instance, if you already had a $5,000 traditional IRA balance with no basis and then made a $5,000 non-deductible contribution, you'd wind up with a $10,000 traditional IRA balance with a $5,000 tax basis. If you then converted $5,000 to your Roth IRA, half that conversion would be considered taxable income to you.

Be smart with your Roth IRA to boost your retirement

No matter how you go about getting money into your Roth IRA, once it's there, it becomes a very powerful part of your retirement plan. The money inside your Roth IRA can continue to grow there, tax-free, for the rest of your life, or you can take it out to spend during your retirement, also potentially free from income taxes. Once you die, your heirs will also have the opportunity to withdraw the money tax-free, making the Roth IRA part of your retirement plan that can help generations.

Those are some pretty powerful benefits available to you for being smart with the moves you make with your Roth IRA. So get started now and increase the total boost your Roth IRA can provide to you.