Most individuals are beginning the process of preparing their income tax returns this time of year paying taxes later is not an option that presents itself. However, an item in the American Taxpayer Relief Act of 2012 has added the flexibility for retirement plans to allow individuals to choose to pay income taxes on their retirement accounts now, so that it won't be necessary when they retire and begin to draw the money out.

That is the primary attraction of a Roth account. If your 401(k) plan currently has a Roth option, the good news is that you may be eligible for this conversion. However, it will require some research to determine if it's the right decision for you.

At face value, the trade-off is simple. If you convert pretax dollars to a Roth account within your plan you are essentially taking a distribution, within the plan, and opting to pay taxes in the year of conversion at your current income tax rate. This, of course, leads to an increase in taxes that are due for that year, and may even increase the tax bracket you are in. Once done, the new Roth dollars and any future earnings will grow tax-free as long as you hold the account for at least five years and are at least age 59 and a half years old before you withdraw it from the plan. A word of caution: the conversion is irreversible and therefore requires some forethought and analysis.

The types of individuals that may benefit most from this include people who anticipate making a significantly higher income as they near retirement, or believe they will be in a higher tax bracket in retirement. Individuals who believe this will find that a Roth account may fill a need in their estate planning. It's important to project how these changes will affect individual tax situations and to make sure the available resources outside of the plan are there to pay for the taxes now. Specific details on the new Roth conversion are still being researched and guidance is needed before most retirement plans will consider adding this provision.

As an employee you can consult your summary plan description or talk to your employer's benefits department to find out if your plan currently allows Roth accounts and whether the plan will add the feature to allow you to convert your pretax dollars. It's great to have options when it comes to saving for retirement because it's within those options that you re able to develop an effective strategy to meet your retirement goals.