Summary
A Roth conversion can provide valuable retirement benefits, including tax-free growth and withdrawals and no required minimum distributions. However, converting a large amount from a traditional retirement account can significantly increase taxable income and create unexpected costs. A sizable conversion may push you into a higher tax bracket, increase taxes on Social Security benefits, or trigger higher Medicare Part B premiums through income-related monthly adjustment amounts (IRMAAs). The article recommends looking beyond the immediate tax bill and considering these broader effects. Spreading a large Roth conversion across several tax years can help manage taxes and potentially reduce the risk of costly consequences later.
The Motley Fool
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