Roth Conversion Advantages

Submitted by Humberto Guzman on Thu, 2020-12-17 18:03

Other than not paying taxes on earnings in a Roth IRA, are there other advantages for a Roth Conversion? I plan to let my heirs pay the taxes on the traditional IRA savings.



Submitted by Alan - IRA critic on Thu, 2020-12-17 20:18

  • Conversions would reduce the balance of your IRA and therefore your own taxable RMDs each year. That will lower your taxable income, and possibly your marginal rate, or could reduce or avoid the NIIT or IRMAA surcharges on your Parts B/D Medicare.  Conversions are therefore most beneficial when the effective rate you pay for the conversion is not more than what you would have paid without converting. 
  • Heirs are better off inheriting a TIRA if their tax rates are less than yours. If they are in a higher bracket, they would be better of inheriting a Roth IRA. Their gross inheritance would be lower as a function of the taxes you pay for conversions, but higher income beneficiaries would still be better off inheriting a Roth.

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