Roth conversion from a traditional roll over IRA

Forum|Forum|10 months ago
May 24, 2025
3 replies
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I have a traditional IRA at 71 yrs old. If I convert to a Roth IRA, is it taxable in NJ.

also at 71 does it make sense to convert with large amts in Ira’s and little in non qualified accts.

Bsch4477

Employee

Yes, it would be taxed by NJ. Whether a conversion makes sense depends on your overall financial situation and goals best addressed by a financial advisor.

baldietax

if your user ID is a phone number you should change that, this is a public forum

fanfare

Employee

It depends on whether you have heirs that you would want to inherit a Roth IRA.

It also depends on how long you expect to live.

At age 73 you must distribute actual RMD, which cannot be converted to Roth IRA.

Figure you have to start RMDs at 71 (old rule), but the distribution can be converted to a Roth for the next two years.

@User0001

Opus 17

Employee

Here are some differences between a traditional and Roth IRA in retirement.

A traditional IRA has an RMD, a Roth does not. If you have enough saved that you don't need to spend it, converting to a Roth allows you to hold on to the money longer and maybe pass it down to your family.

However, if you require long term nursing home care, Medicaid won't pay until you spend all your assets. A traditional IRA is protected from this rule, you must take the RMD and use it to pay the nursing home before Medicaid will pick up the rest of the cost, but the remaining balance in the traditional IRA does not have to be spent. However, a Roth IRA is not protected because it does not have an RMD, so if you require long term nursing care, you may be forced to use up your Roth IRA before Medicaid will help you.

Converting from a traditional to Roth IRA counts as "income" that also increases the tax on your social security. For example, if you are single and receive $2000 per month of social security income, the first (about) $15,000 of your traditional IRA withdrawal is tax-free because your social security is not taxed either. If you withdraw or convert more than that, you pay taxes on the withdrawal or conversion AND you pay tax on part of your social security.

On the other hand, if you anticipate tax rates will increase, you might want to convert before the increase. Under current law, tax rates will increase at the end of 2025, but there are plans (not final yet) to make the current lower rates permanent.

There are so many moving pieces, you may want to discuss with a financial planner.