A 55-year-old client with a high current income but expecting significantly lower income in retirement is considering converting her Traditional IRA to a Roth IRA. Which of the following is the most important consideration?

Why A — The converted amount will be subject to ordinary income tax in the year of conversion, increasing her tax liability in a high-income year

When converting a Traditional IRA to a Roth IRA, the entire converted amount is treated as ordinary income in the year of conversion. Since this client currently has a high income, the conversion would be taxed at her high marginal rate. It may be more tax-efficient to wait until retirement when her income (and tax bracket) is expected to be lower. There is no age restriction on Roth conversions, and the 10% penalty does not apply to conversions (though it may apply to converted amounts withdrawn within five years).