Overview
- Yahoo Finance highlights adviser Andy Panko’s warning that Roth conversion calculators can mislead because they hinge on guesses about future tax rates, market returns, inflation, and even the order of spouses’ deaths.
- A Kiplinger case study shows a near‑retiree likely worse off converting because the Roth five‑year rule would block tax‑free access to converted funds during the period they planned to spend that money.
- Converted amounts count as ordinary income in the year of conversion, which can push people into higher tax brackets and trigger steeper Medicare Part B and Part D premiums.
- Planners often recommend paying the conversion tax from non‑retirement savings to keep more money invested and spreading conversions over several years to smooth the tax hit.
- A Roth conversion moves pre‑tax IRA or 401(k) money into a Roth IRA in exchange for paying tax now, and the fit varies by person because Roth IRAs avoid required minimum distributions but rely on assumptions that may not hold.