Part 5/8:
One of the primary considerations for converting from a traditional IRA to a Roth IRA is the tax implication. When funds are rolled over, the converted amount is added to the current year's taxable income. For example, if an individual were to convert their traditional IRA today, they would need to declare that amount as taxable income when filing taxes for the corresponding year. This potential tax liability makes timing essential; converting during a year with lower income can minimize tax burdens.
Gaby expressed relief at having rolled over her funds while taxes worked in her favor, highlighting the benefits of strategic planning.