Roth Conversion
How do I determine if a conversion is right for me? I ask my CPA and he seems puzzled. My financial advisor says it’s my call. I estimate my income and come up with a $3K annual difference when converting $75K in 2022 and taking RMD in 2025. Of course my tax bill increases in 2022 if I convert, I just can’t see the benefit. The goal of this conversion is to minimize taxes in the future. Michael Kitces is a great resource but shouldn’t my professional team be more helpful? Thanks Terry and Happy New Year!
Terry Says
I don’t know how old you are, but if you are 65, did anyone mention the impact of the additional income on Medicare Part B and D premiums? That bump in income could make your premiums rise and offset any tax gains.
Aside from that, it’s too late to convert in 2022 as your question asks. So you have plenty of time to work out the various issues. For example, do you have enough other money and income that you dont’ want to be forced to take RMDs in retirement? Then you might want to convert to a Roth, which won’t have RMDs.
And if you’re younger, you get a longer time for your money to grow tax-free. So in your 50s, without concern about Medicare, might be a good time to do the conversion.
And do you have money outside your retirement accounts to pay the taxes the year you convert? If not, it sort of negates the benefit of conversion to pay the taxes with money that won’t get rolled into your Roth.
Didn’t anyone go over those issues with you? If not, you need a new financial advisor — Try Wealthramp.
