ROTH conversion before a move to a low/no tax state
Is a ROTH converson still advisable for a 62 year old if the tax payer will be moving from a high income tax state to a low/no income tax state. The tax savings will be beneficial for federal taxes; however, if the tax payer will pay an additional 5+% state tax now, I am unconvinced this will amount to a net tax saving at 73 years of age.
Permalink Submitted by Alan - IRA critic on Sun, 2023-07-09 23:33
Consider the total tax rate (federal and state) for conversions vs. the future total rate which may or may not be 5% lower depending on future taxable income and deductions. The move, while beneficial, should not be the only factor considered. For example, there might only be a few years before SS adds to income. If retired, but prior to claiming SS benefits the person might convert an incremental amount just to take advantage of those few low income years. Of course, if this move will take place very soon it would probably pay to delay conversions until residency is firmly established in the new lower tax state. If married, the spouse’s retirement date and SS claiming must also be considered. The conversion decision should be re assessed each year based on current income and tax developments.