State income taxes is an important consideration when considering a Roth IRA conversion.This is especially true for preretirees and retirees planning to move, but retirees planing to maintain homes in different states during retirement also need to be aware of the rules determining their legal residence for tax purposes. There are no hard and fast rules on determining residency. Some of the key determinants are voter registration, place of employment and where a driver's license and license plates were issued. Many retirees in high-tax states such as New York and New Jersey relocate to states with lower state income tax rates, and it's important to determine if that's coming -- and, if the answer is yes, when -- before converting to a Roth IRA. If such a move comes within a year or two, an income tax projection should be prepared. Preparation of the projection will show the impact of deferring the conversion till the retiree has relocated.
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