Roth Conversion Strategy

If your taxable income for a given year is going to be very low due to various factors such as a net operating loss carryforward from a failed business, then it would be the right year to convert part of your regular IRA , 401(k) or any qualified retirement plan with pretax funds into a Roth IRA. The amount you convert is taxable income which can be offset by the net operating loss carryforward and still result in no tax for the year. You also then have a Roth that allows you a lot more flexibility in the timing and amount of distributions. There is no required minimum distribution and no required beginning date for distributions like in a regular IRA.  You do have to leave the funds in the Roth for at least 5 years before you start pulling the funds out or you are subject to a 10% penalty if you under age 59 1/2.