Roth Conversions – Just Because You Can Doesn’t Mean You Should
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Some financial advisors are warning against a Rush to Roth. The key to is to approach the idea cautiously and do a comprehensive analysis. Whether a Roth conversion makes sense is a highly individual decision, to be made in consultation with your advisors.
I did a Roth conversion the last time the IRS allowed us to pay the taxes over a couple of years, which was about 10 years ago. This time around, however, I’m not so keen on the idea.
I have not completed an analysis of my own situation at this point, but I will probably decide against a conversion of my traditional IRA, as most of the additional income would likely be taxed at combined federal and state rates of over 40%. Even with virtually certain future income tax rate increases, I expect that my taxable income will be lower in retirement. That’s particularly true if I head to sunny Florida, where there’s no state income tax! Plus, I’m not keen on giving Uncle Sam and the NC Department of Revenue $40,000 + of my savings – I may need it down the road (or even next year, as my son heads off to college)!
