The funds accumulate tax deferred, but are taxed as ordinary income when withdrawn. Whether you should convert or not is discussed later in this section. What makes the Roth IRA attractive is the tax-free income at retirement. That is not an option under any other qualified retirement plan. Not everyone agrees with this conclusion.
Some planners believe the tax bracket of the individual drives the decision.
All the experts agree that the advisability of converting your existing IRA to the Roth IRA is more difficult to judge than where to make new contributions. The primary reason is the tax treatment at conversion. The old IRA is treated as all taxable income in the year of conversion, though payment of the taxable amount can be spread out over four years if you convert in 1998. He is less excited about the prospects for the future than Corrick. The compound-interest story in Table 1.13 should convince you that no amount is too small to retain or roll over.