Could a Roth Conversion Actually Cost You More Money?
Roth conversions are often presented as an obvious tax-saving strategy. Pay taxes now, move money into a Roth IRA, and potentially enjoy tax-free withdrawals in retirement. Sounds like a pretty good deal, right? But what if converting your money actually leaves you worse off financially?
In this episode of She's Talkin' Money, financial planner Shari Rash breaks down the real cost of a Roth conversion and why the money you use to pay the tax bill matters just as much as the conversion itself. You'll learn what happens when you use money from your IRA to pay conversion taxes, why you could face an additional 10% early distribution tax if you're under 59½, and why paying the bill with cash isn't automatically the better answer.
We'll talk about how Roth conversions affect your emergency savings, investments, bonuses, and monthly cash flow, plus how to decide how much to convert based on your income, tax bracket, and long-term goals. You'll also learn when waiting until retirement might make more sense, how Roth IRA withdrawal rules work, and why becoming work-optional before traditional retirement age can change the equation.
Because the real question isn't just whether you can afford the taxes today. It's what you're giving up to pay them.
Roth conversions can be a valuable financial planning strategy, but a smart tax decision isn't always a smart financial decision.
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Shari Rash is a financial planner and Investment Adviser Representative of GWA Wealth, a Registered Investment Adviser. This podcast is for educational purposes only and is not personalized investment, tax, or legal advice. Nothing discussed should be considered a recommendation, and listening does not create an advisory relationship. Investing involves risk, including possible loss of principal. Please consult your own financial, tax, or legal professional before making decisions based on your individual circumstances.
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