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403b conversions to Roth — tax impact

By Terry Savage on November 23, 2017 | Financial Planning / Retirement

I have an older 403B plan from a previous employer. The balance is less than $50,000. I am retired and currently in the 15% tax bracket for the next few years as I am not yet drawing my pension. Since I am in the lower tax bracket for now, I was thinking of converting my 403 to a Roth IRA. I know I would owe the tax on this but would it be considered income on my Federal 1040 ? I am receiving health care through the Affordable Care Act and extra income would have an impact on that. Thank you.

Terry Says

You have it exactly right.  The amount of the conversion is included in your income -- as ordinary income -- in the year you do the conversion.   That will definitely impact your subsidy for ACA insurance, and may impact other benefits as well, if they are based on income.PLUS, you'll want to pay the taxes on this conversion with money held outside the 403(b) plan.  So it will soak up some of your other liquid assets.  This may not be a wise move considering all the implications.

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