Conversion

• If you have a traditional IRA, you may convert it into a Roth IRA. With a traditional IRA, the funds in the account get there through your pretax contributions. With a Roth IRA, you fund the account with after-tax money. This means that once you get the money into the Roth IRA, you never have to worry about paying taxes on it again, which is ideal for retirement savers who want a tax-free source of income.
  
  

Taxes

• When you convert from a traditional IRA to a Roth IRA, you have to deal with the taxes. Since you're converting from a pretax account to an after-tax account, the money that you convert has to be counted as regular income. This means that you have to pay taxes on the amount at your marginal tax rate. During the year of the conversion, it could potentially put you into a higher tax bracket.
  
  

Withdrawal

• Once the money is in the Roth IRA, you can make withdrawals. The money that you contribute to a Roth IRA can be withdrawn at any time without penalty. Since you have already pay taxes on the money, it doesn't matter if you take it out. The earnings from investments have to be left in the account, however. If you take the earnings out before you reach retirement age, you have to pay a 10 percent early-distribution penalty.
  
  

Exceptions

• With a Roth IRA, there are a few exceptions to the rules that allow you to take your contributions and earnings out of your account. For example, if you're going to buy your first house, you can take out up to $10,000. If you have to pay medical expenses that are higher than 7.5 percent of your income, you could also take money out of the Roth IRA.
  
  

Considerations

• With the Roth IRA, it's easy to get your hands on your retirement money if you want. This doesn't necessarily mean that it's conducive to helping your retirement. When you take a substantial amount of money out of your Roth IRA, it could set your retirement back by several years. You may have to work more years to make up for the loss.