Roth conversions may reduce future taxes, but large sums may bring higher tax rates and Medicare premium surcharges two years later for people on or nearing Medicare. Compare conversion tax rates with expected rates on withdrawals, and spread conversions across years.
The article illustrates the rate comparison with someone converting at 24% while expecting required minimum distributions to be taxed at no more than 22%; it says paying the higher rate upfront would not help. Conversions are taxed in the year made. The article recommends limiting annual moves to a chosen bracket, citing $150,000 as a possible cap if that keeps someone within the 24% bracket. A $1 million conversion in one year could put much of the sum at a very high tax rate.
The article says required minimum distributions from traditional retirement accounts begin at age 73 or 75, depending on birth year. A Roth conversion moves funds from a traditional account into a Roth IRA; it says Roth accounts offer tax-free gains and withdrawals and have no required minimum distributions.
