Anyone, regardless of income, is eligible to convert his or her Traditional IRA into a Roth IRA. To do so, your clients will login via web browser and click "Settings". Once on the settings page, they can select the "Accounts" sub-header. To the far right of their Traditional IRA account, they'll click the ellipsis button (...) and select "Convert IRA to Roth" and then follow the prompts. Note that clients will not see the option to do this until the Traditional IRA has been funded. The wizard will guide clients through the steps. If clients don’t yet have a Roth IRA account, this process will create one for them.
Important things to note:
- Conversions must be done before December 31st of the tax year.
- Betterment does not withhold any taxes for you, because it reduces the amount of money that can grow tax-free in your Roth IRA.
- Generally, any funds you convert from Traditional to Roth that were previously deducted will be subject to income tax. Since Betterment cannot provide specific tax advice, we recommend you consult a tax advisor and the IRS Publication 590.
Please note that for clients who live in Michigan, there are special requirements for completing a conversion.