Nicholas Scheibner is quoted on this topic in an article in NJMoneyHelp.com by Karin Price Mueller, originally published on September 15, 2020.
A 60-second read by Nicholas Scheibner, CFP®: If you want to transfer your 401(k) to a Roth IRA, here are three things to consider, other than the tax rates, before making a Roth conversion:
When you convert money from a traditional IRA to a Roth IRA, you will generate income tax both Federally and via the State. Although it can make sense to do this in a lower income year, make sure you are not causing other issues:
- An increase in income can affect your Medicare premiums. Medicare can increase your part B premiums with an Income Related Monthly Adjustment (IRMA). For an individual, if your income is over $87,000 you may pay an additional $144.60 per month.
- Also, if you live in New Jersey, you may be receiving the Senior Property Tax Freeze if you are 65 and older. If your income exceeds $91,505 you may be ineligible for the credit.
- If you are in a low tax bracket, and you do not have health coverage through work, or a spouse’s coverage, you may be on Medicaid. Since Medicaid is income-based, check with your state’s Medicaid office to see if a Roth Conversion will affect eligibility.
If you have any further questions, please reach out to your Baron Team.
Disclosure: This is a general communication being provided for informational purposes only. Past performance is no guarantee of future results. Every investment strategy has the potential for profit or loss. This material is not intended to be relied upon as a forecast, research, tax or investment advice. Please consult your tax planning professional for personal tax advice.