- Conversion Timing
- Why Convert?
- When to Convert?
- Issues to Consider Before Making the Decision
- Will there be enough years before retirement to recoup the conversion tax dollars through tax-free accumulation?
- Is your income low enough or are your deductions high enough to enable a tax-free or minimal tax conversion?
- Will you be in a lower or higher tax bracket in the future?
- Where would the money to pay the conversion tax come from? Generally, it must be from separate funds. If it is taken from the IRA being converted, for individuals under age 59½, the funds withdrawn to pay the tax will also be subject to the 10% early distribution penalty, in addition to being taxed.
- It might be appropriate for you to design your own custom conversion plan over a number of years, rather than converting everything at once.