Types

• The IRS recognizes three ways to convert your traditional IRA into a Roth IRA: a rollover, trustee-to-trustee transfer or a same trustee transfer. In a rollover, the money is paid to you, while with either type of transfer the money is moved directed from one account to another.
  
  

Benefit

• When you convert your traditional IRA to a Roth IRA, you are able to take advantage of the Roth IRA's tax benefit of being able to withdraw the money tax-free at retirement.
  
  

Warning

• When you move money from a traditional IRA to a Roth IRA, you must include the amount of the conversion as taxable income for that year. For example, if you move $20,000 from a traditional IRA to a Roth IRA, your taxable income for the year would increase by $20,000.
  
  

Time Frame

• If you open your first Roth IRA when you convert the money from a traditional IRA, you must wait at least five years before you are allowed to take money out of your Roth IRA penalty-free regardless of whether you have reached age 59 1/2.
  
  

Misconceptions

• Anyone can convert money from a traditional IRA to a Roth IRA as of 2010. Prior to 2010, you had to meet certain income restrictions to contribute to a Roth IRA.