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Retirement tax questions
Most financial planers will advice to always pay the tax on a Roth conversion separately if possible, to preserved the retirement principle. If only 80% of the 401(k) is converted then it will probably take many years for it to grow back to the current value.
You should not wait until tax time next year to pay the tax, it should be paid as an estimated tax in the quarter that the conversion is done to avoid an underpayment of tax penalty. Taxes are pay as you go. If you wait until tax time and owe more than $1,000 tax then there can be an underpayment penalty if estimated tax is not paid during the year.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
‎August 19, 2020
3:44 PM