Dear Liz: The letter writer who asked about Roth conversions should also consider that they or their spouse will eventually be a widow(er) and will be subject to the income tax “widow’s penalty.”
Roth conversions now protect the survivor against some of that tax bite.
Answer: The widow’s penalty refers to the higher financial burden many survivors face after losing a spouse as they change from “married filing jointly” status to “single” status.
While their incomes may drop, their taxes and other costs may rise.
Having at least some money in a tax-free account can help with this as well as a number of other situations in retirement, which is why it’s important to fund a Roth account during your working years if you can.
The main downside to Roth contributions is that you don’t get an upfront tax break for making them.
Conversions, though, are more complicated.
They trigger a tax bill and can have ripple effects, such as reducing eligibility for tax credits, financial aid or health insurance subsidies.
Late-in-life conversions can increase Medicare premiums and cause more of your Social Security checks to be taxable. That’s why conversions should only be considered after careful consultation with tax pros.