Part 8/10:
Choosing the right time for conversion can maximize benefits. Converting during years when your income is lower—such as early retirement or during periods of unemployment—can reduce the taxes owed on the conversion.
Furthermore, if you anticipate being in a higher tax bracket in the future, converting now could lock in lower tax rates. Conversely, if you expect lower income, deferring conversions may be advantageous.
Limitations and Restrictions to Keep in Mind
While there's no limit to how much you can convert annually, certain rules can affect your strategy:
Tax Payment: You must be able to pay the taxes owed without compromising your financial stability.
Five-Year Rule: Early withdrawals of converted funds (before five years) carry penalties.