How to Convert Your Fidelity Traditional IRA to a Roth IRA
Now that you've decided to convert your Traditional IRA to a Roth IRA, you'll need to open a new Roth IRA and then transition the funds from your existing Fidelity Traditional IRA. The good news is that most of the time you can open the account and complete the conversion steps online in less than 20 minutes.
Why would I want to convert my IRA to a Roth IRA?
For many people, the decision to convert from a Traditional IRA to a Roth IRA comes down to taxes, time, and cost.
Because you pay taxes on your conversion amount, as well as on all future contributions, up front, rather than when you withdraw the funds, you owe no taxes on future earnings as long as you have met the five-year aging requirement and are over 59½ or disabled when you begin taking withdrawals. Taxes on Roth contributions are based on your current income level, so if you think you'll be in a higher tax bracket in the future, it might be smart to pay the taxes now. Visit our Tax Topics page, Roth IRA Conversions and Taxes to learn more about the tax benefits and implications.
The financial benefits of conversion typically increase the longer your money remains in the Roth IRA and because there are no minimum required distributions with a Roth IRA, your money can mature longer. There is a five-year aging requirement on Roth accounts, so if you plan on withdrawing the money before that period, you will be subject to a 10% penalty. Because you're moving untaxed assets into an account where assets are taxed prior to contribution, you will owe taxes on the IRA assets you convert. There is no penalty for converting from one account to another, but how you pay the taxes could affect the efficiency of the conversion. So you'll need to consider whether you can afford to pay those taxes this year.
If you'd like more specific information about how a Roth IRA could benefit your overall investment strategy, take a look at our Roth Conversion Evaluator or speak to your financial advisor.
Note: We do not suggest using retirement money to pay taxes from your Roth conversion for two reasons: it reduces how much money goes into your Roth IRA and if you're under 59½, you may have to pay a 10% penalty for taking money out to pay the taxes you owe. Instead, consider using cash or other savings held in nonretirement accounts.
What do I need to know?
The process for converting your Traditional IRA to a Roth IRA is twofold. First you will open a new Roth IRA and then you will convert assets from your existing Traditional IRA into your Roth account. You can complete the entire process online, provided you meet the following criteria:
- You currently have a Fidelity Traditional IRA (information on converting a non-Fidelity account into a Fidelity Roth account can be found on the Roth Conversion Checklist page under Converting a Traditional IRA).
- You've taken your minimum required distribution (MRD) from the IRA you're converting (if needed).
- You plan to defer the tax payment on your conversion, rather than pay now.
When you are ready to convert:
- Follow these easy steps to convert your IRA to a Roth IRALog In Required.
- Review and confirm your personal information by selecting Continue.
- Review and confirm your employment information by selecting Continue.
- In Account Settings, select your core position.
- Review and confirm all of your remaining information and then select Confirm My Information. After that, open and read the terms and conditions, check the appropriate box, and select Agree and Open Account.
You've now successfully opened your new Roth IRA. The Fund Your Account page appears and you will see a message with your new account number.
- Under How would you like to fund your account?, select Convert an existing Fidelity IRA to a Fidelity Roth IRA.
You can choose to defer the tax payment or pay now. If you elect to defer your tax payments, you will be asked if you're selecting a whole or partial conversion. After you make your selection, your assets are converted into your new Roth IRA.
Note: If you elect to pay taxes now, please call us at 800-343-3548 to complete your conversion.
If you prefer, you can download and mail in the Roth IRA Conversion form (PDF) or call us at 800-343-3548 for assistance.
What to expect
If you defer paying the conversion taxes, you will need to pay the taxes as a part of your tax obligation for that year. You will receive a 1099-R from the IRA you converted showing the distribution of funds, as well as a Form 5498 showing the contribution to the new Roth IRA.
It takes about 3 business days to process your transaction. You will receive a confirmation from Fidelity by U.S. Mail within 7–10 days.