Roth Conversion Tax Consequences to Consider

Roth conversions can have consequences that go well beyond the tax on the amount you convert.

A large conversion can increase taxable income and potentially affect your marginal tax bracket, Medicare premiums, Social Security taxation, or eligibility for certain tax benefits and subsidies. And if you don't have outside cash available to cover the tax, using part of the converted funds can reduce the amount that remains invested.

Tax planning is rarely about looking at one transaction in isolation. The better question is how the decision fits into your entire financial picture.

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