Only Roth IRAs offer tax-free withdrawals. Income tax was paid when the money was deposited. If you withdraw money before you turn 59 and a half years old, you'll have to pay income tax and even a 10% penalty, unless you qualify for an exception or withdraw Roth's contributions (but not Roth's earnings). This will reduce the taxes you pay now and allow you to withdraw tax-free money from the Roth IRA in the future.
Traditional IRAs require you to pay taxes when you withdraw funds, while Roth IRAs don't make tax withdrawals, as long as you follow the rules. Converting a Roth IRA is the process of converting your traditional IRA into a Roth IRA. For example, some investors deposit their shares in one IRA, their bonds in another, and alternative assets, such as cryptocurrencies, in a self-directed IRA. Enter any non-deductible contributions you make for the current year and add them to previous years' non-deductible contributions (minus distribution adjustments) to get the total basis for all your traditional IRAs.
That's because a traditional IRA is funded with pre-tax dollars and a Roth IRA is funded with after-tax dollars. You should do this even if the IRA from which you are withdrawing the distribution only contains non-deductible contributions. Deciding what investments you keep in a Roth account or a traditional IRA can make a big difference in the taxes you owe. If this were not necessary, people could continue to allow money to grow tax-free while delaying the payment of income tax on the funds in the account.
If you expect your tax bracket to be higher when you retire than it is now, it may make sense to convert your traditional IRA to a Roth IRA. Another strategy is to convert part of your traditional IRA into a Roth IRA in years when you expect to be in a lower tax bracket. If you find yourself in a lower than usual income tax bracket in a year, you may want to transfer funds from a traditional IRA to a Roth IRA up to the contribution limit of that tax bracket. When you make tax-deductible contributions to an IRA, the funds in your account won't be taxed until you withdraw them as a distribution or convert them into a Roth IRA.
Possibilities include converting traditional IRAs into Roth IRAs, having several IRAs, donating IRA values to a charity, or creating a QLAC.