Rollover IRA to Roth IRA?

[FFMedic699]

I am 37 years old. I am a muncipal firefighter/paramedic. Through work I have a 401/k that my employer matches 16% of my yearly salary on top of my 5% contribution to the plan. (This is how they got the union to replace a normal pension plan well before my time.) On top of that, I have a 457 through my employer as well. They are my primary retirement plans and they are doing very well. So....the story goes:

I have 2 other 401k plans from previous employers that stupidly, I never payed attention to. After I left employment I never did anything with them and they ended up getting dumped into rollover IRA accounts. One account has about $10,500 and the other only has about $3000. I also just opened a regular cash brokerage account online as I am starting to learn about trading and finance management.

My question: Should I roll the 2 IRA's into one Roth IRA now while I'm semi-young, the accounts are not too expensive and pay the approximately $4000 in taxes now? Giving me the best of both worlds when I retire and have both taxed and non-taxed distributions. Or, do I roll the smaller IRA into the bigger IRA and gamble with how income tax will be in 25 years, thus having all of my retirement distributions taxed? All to save $4000 today.

I am new to personal finance and now want an active role in my retirement and personal finances. Thanks in advance for any advice. (I am eligible with my income level for roth IRA contribution.)

[feh]

If you are new to finance/investing, please take the time to educate yourself. This is a great place to start:

https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit


To answer your question - assuming your tax rate is higher now than it will be in retirement, the answer is no, do not convert to a Roth.

[Sagalamora]

There is no straightforward answer, it depends on your marital situation, your gross income and so on. There are online tools that could help you take a wise decision. Just google Conversion IRA Evaluator for example (I could directly post a link to one of those tools but I'm a newcomer here and this would violate the rules, sorry)

[dczech09]

If you expect your income at retirement to be higher than it is now (thus you would be in a higher tax bracket), then it would be advantageous to convert the two Traditional IRA's to a Roth IRA.

If you expect your income at retirement to be lower (thus you would be in a lower tax bracket), then it would make more sense to keep the two Traditional IRAs.

If you do decide to go for the conversion, make sure that you can pay the taxes out of pocket. If you can, then great. If not, then save up before making the switch.