The worst-case scenario is that your Roth IRA conversion pushes you into the next tax bracket, forcing you to pay a larger percentage of your income to the government. That’s something you want to avoid at all costs. Fortunately, it’s not too difficult to do.
Most people wait until the end of the year to do Roth IRA conversions so they have a good idea of where they’ll fall within their tax bracket. Then, they convert as much as they can without jumping up to the next tax bracket. The next year, they do the same thing, and so on until they’ve converted all that they want to convert.
Even following this approach, it’s possible you could still find yourself facing a tax bill, depending on your income, tax withholding, deductions, and more. If you believe you could owe the government, make sure you have some cash on hand to help you cover this cost. Otherwise, look into payment plan options once you see how much you owe.
If you decide a Roth IRA conversion isn’t the best move for you right now, you can always do it another year if you change your mind. It doesn’t matter if you do the conversion right now or right before retiring. It’s all the same to the government, as long as you pay taxes on the amount you’re converting at some point.
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