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Converting a portion of an IRA to a Roth IRA is a complex process that involves many moving parts. Unintended consequences can result if the strategy is not properly analyzed or handled, including a possible impact on Medicare premiums two years after the conversion. (Remember IRMAA!)
To help make the analysis easier, we have created the “Will My Roth IRA Conversion Be Penalty Free?” flowchart. It addresses common issues that clients encounter when doing a Roth conversion, including:
Implications for IRAs with after-tax contributions
Pro-rata and aggregation rules
Simple IRA rules
Medicare Part B and Part D surcharge impact
Application of the 5-Year Rule
RMD coordination issues