Michael Joyce spoke with Money Magazine about what investors should consider before a Roth conversion. It’s not only important to decide whether or not you’ll convert, but also how much you’ll convert. There are important tax implications to consider.
If you’re among those who lost a job, pushing you into a lower income tax bracket, then it may be a good opportunity to convert to a Roth IRA, because the tax bill on your conversion will be lower.
How Much Should Be Converted?
It’s not only important to think about whether or not you will convert, but also how much. You don’t have to convert an entire IRA – just switch a portion that will not push you into a higher tax bracket. Retirees have to be careful that the income resulting from their Roth conversion doesn’t push them into a higher Medicare income bracket, meaning they would have to pay higher Medicare Part B (and possibly D) premiums. The good news is that, once you fully convert to a Roth IRA, you don’t have to take required minimum distributions starting at age 72, and can leave that money in your account to grow tax-free for yourself in the future, or your heirs.