What's Your Plan for Your ROTH CONVERSION? (Where Are You Retiring?)

Why It Matters

Ignoring state tax differences can turn a seemingly beneficial Roth conversion into a costly mistake, directly affecting retirees' after‑tax income and wealth preservation.

Key Takeaways

• Compare current state tax rate to retirement state's tax rate before converting.
• High‑tax state residents may face higher conversion cost than future withdrawals.
• Roth conversion is unattractive if future tax bracket drops significantly.
• Model both federal and state taxes to determine net benefit.
• Relocate to a no‑tax state can make traditional IRA more efficient.

Summary

The video warns investors that a Roth conversion cannot be evaluated solely on federal rates; state tax environment where you live now versus where you retire can flip the math.

Using a New York‑to‑Florida scenario, the presenter shows a 30% federal plus 10% state tax (40% total) at conversion versus a 25% federal rate with zero state tax on withdrawals, illustrating a higher tax bill if you convert now.

He emphasizes, “It does not make sense to convert” when the combined tax burden at conversion exceeds the future tax burden, and stresses running the numbers for both jurisdictions.

The takeaway is that retirees should model federal and state taxes, consider relocation timing, and possibly keep assets in a traditional IRA if they expect to move to a lower‑tax state, preserving after‑tax wealth.

Original Description

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Roth conversions aren't always the right move — especially if you live in a high-tax state now but plan to retire in a state with no income tax. Before you convert, you need to run the numbers on what you're paying today in state and local taxes versus what you'll actually owe in retirement. This is one of the most overlooked mistakes in retirement tax planning.

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