What is the downside of converting IRA to Roth?

The main downside of a Roth conversion is the immediate tax bill. The converted amount gets added to your taxable income and can push you into higher tax brackets, trigger higher Medicare premiums, or reduce certain tax credits and deductions. If you convert a large sum in one year, the tax hit can be quite painful. There is also “market risk timing”: if the market drops right after you convert, it may feel as though you paid tax on value that disappeared. Using IRA funds themselves to pay the tax further reduces what ends up inside the Roth. Finally, there is always some uncertainty about future tax law and whether Roth advantages could be limited later.

Learn more about IRA conversion appraisals.