"The Roth conversion has taken on its own virality. It's like, whoa, you got to do a Roth conversion. Everybody needs to do a Roth conversion or else you're crazy. That's not true at all."
"If you're going to convert IRA money to a Roth and pay 20% to do it or 25% to do it, but you know, in retirement, you're going to be in the 15% bracket federally and your state tax may end up at zero, then why would you pay 25% to get money out of an IRA and put it in a Roth when you're only going to be paying 15% in the future?"
"That spread, 25% today versus 15% later, means the conversion costs more on every dollar converted. On a $100,000 conversion, that is a $10,000 penalty for following advice that did not fit the situation."
Roth conversions are often recommended, but they may not be suitable for everyone. The key factor is the comparison of current tax rates to future rates. If the current tax rate is higher than the expected future rate, a conversion may not be advantageous. For example, paying 25% now to convert to a Roth when the future rate is only 15% results in unnecessary costs. An alternative strategy involves spending down traditional IRA funds during lower-tax years and delaying Social Security benefits.
Read at 24/7 Wall St.
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