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Published: Dec 15, 2020 6 min read
Money; Getty Images

If you’ve been thinking about converting your traditional IRA into a Roth, this could be the year to finally do it.

This type of retirement savings account is appealing because of its tax treatment. A traditional IRA (individual retirement account) is tax deferred — that is, investors receive a tax deduction on the money they contribute, then owe taxes when the money is withdrawn. A Roth IRA allows for the opposite: you pay income taxes on the money you contribute, but then can take it out tax-free.

Roth IRAs are a popular retirement savings option. From the third quarter of 2019 to the third quarter of 2020, 58% of all IRA contributions at Fidelity Investments were to Roth IRA accounts, according to the company. And earlier this year, there was a surge in conversions: Fidelity saw a 76% increase in the number of Roth IRA conversions in the first quarter of 2020 versus the first quarter of 2019.

Is it a move you should make before the year is up? For your conversion to count toward the 2020 tax year, you'll need to make it by Dec. 31.