The Charles Schwab Guide to Finances After Fifty by Carrie Schwab-Pomerantz

Author:Carrie Schwab-Pomerantz [Schwab-Pomerantz, Carrie]
Language: eng
Format: epub
ISBN: 978-0-8041-3737-9
Publisher: Crown Publishing Group
Published: 2014-04-01T04:00:00+00:00

CON

The biggest deterrent to converting to a Roth is that you have to pay income taxes up front. Note in particular:

• The assets you convert are added to your gross income in the year you make the conversion, so you could be bumped into a higher tax bracket.

• Ideally you should have the cash on hand to pay the income tax. If you have to sell appreciated assets to pay the tax, you’ll also have to pay capital gains tax. If you have to pay the tax from your IRA, you lose the potential benefit of tax-free growth on the amount.

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