Tax payment source
Should you pay Roth conversion taxes from outside funds?
Why outside funds often look better
If taxes are paid from cash outside the IRA, the full conversion amount can reach the Roth. That can be attractive because more money gets access to Roth tax treatment.
The part people gloss over
Outside cash is still money. If it is used to pay conversion tax, it cannot also stay invested, fund near-term spending, or serve as an emergency reserve. A fair comparison should show what those outside tax dollars might have become.
When paying from the conversion can be risky
If taxes are withheld from the conversion, less money reaches Roth. If the account owner is under age 59½, withholding can also create early-distribution penalty issues. This is one reason BucketSavers flags the tax-payment source instead of burying it.
Run both choices in the Roth conversion planner. It runs your plan through the whole household either way — the tax paid from taxable savings, which then stop growing, or withheld from the conversion, with the 10% penalty on the withheld part in years you are under 59½ — and compares after-tax wealth at the end with converting nothing. Whether a conversion is worth doing at all comes before how to pay for it, and the same planner starts there: it compares the rate paid now with three possible future rates.