Roth Conversion in Houston: the rules, the tax, and the next step
Roth Conversion here is a energy problem shaped by employer deferred-comp and energy-sector 401(k)s in a no-income-tax state, where the expensive errors are federal IRMAA and Texas Medicaid look-back — not state income tax — not a national brochure.
A Roth conversion is ordinary income this year — size it on purpose
You move pre-tax IRA or 401(k) money into a Roth and include the converted amount in ordinary income. The Roth then grows tax-free and has no lifetime RMDs. Partial conversions that stay inside a chosen federal bracket (plus the state layer, if any) usually beat converting the entire balance in one tax year.
Two rules surprise people: the 5-year clock on converted principal (a penalty risk before 59½) and IRMAA, which prices Medicare Parts B and D using MAGI from two years prior. Paying the tax from a non-IRA account is almost always cleaner than withholding from the conversion itself.
The local stack this page is actually about
Energy-sector deferred compensation and Texas Medical Center 403b accounts bunch federal income even though Texas levies none. A bonus year plus a conversion plus a pension start is the IRMAA pattern two years later. Texas homestead under Constitution Article XVI Section 50 is not IRA protection and is not a brokerage shield. Texas Medicaid look-back still applies to gifts funded by an energy payout. Product traffic around the energy corridor makes a written job-for-the-contract more useful than a teaser rate. Checkable names on this page: Texas Medicaid, TX LIC. 2357269. For roth conversion, start from energy and Texas Medical Center healthcare — employer deferred-comp and energy-sector 401(k)s in a no-income-tax state, where the expensive errors are federal IRMAA and Texas Medicaid look-back — not state income tax — rather than a national template.
Industry mix and the planning load
ExxonMobil, Chevron, and other energy deferred-comp units; Texas Medical Center 403b plans at MD Anderson, Methodist, and Memorial Hermann; and offshore or plant-shutdown bonuses set the mix. A turnaround-year bonus plus a conversion is the classic overshoot. Homestead folklore does not cover a brokerage account in Harris County. energy and Texas Medical Center healthcare are the two pay-and-savings stacks we actually see. Population context: about 2.3 million residents (U.S. Census Bureau, ACS 2023 5-year estimates). The constraint we plan around is employer deferred-comp and energy-sector 401(k)s in a no-income-tax state, where the expensive errors are federal IRMAA and Texas Medicaid look-back — not state income tax. Competition among advisors is high; that does not create a storefront and it does not change the statutes.
Conversion years stacked on energy income
Deferred comp and 401(k) money from energy make a single-year conversion easy to overshoot. Employer deferred-comp and energy-sector 401(k)s in a no-income-tax state, where the expensive errors are federal IRMAA and Texas Medicaid look-back — not state income tax Texas has no state personal income tax. IRMAA prices that spike two years later. Partial rungs beat “convert it all.” Advisor and product density is high, so the scarce thing is a written recommendation that survives a second set of eyes — not another seminar.
The gap year next to Texas Medical Center healthcare
Households leaving Texas Medical Center healthcare work before RMDs (age 73 for most under SECURE 2.0) have a cleaner ladder — unless a pension or Social Security already fills the bracket. Plan conversions against the federal bracket and IRMAA cliffs; treat Texas homestead and Medicaid rules as a separate, documented workstream. Pay the tax from a non-IRA account.
What is different in Houston
ZIP codes 77002, 77084 is in the service area. Roth Conversion work here is usually about employer deferred-comp and energy-sector 401(k)s in a no-income-tax state, where the expensive errors are federal IRMAA and Texas Medicaid look-back — not state income tax — not a generic “retirement tips” article. Plan conversions against the federal bracket and IRMAA cliffs; treat Texas homestead and Medicaid rules as a separate, documented workstream. Advisor density is high, so the scarce thing is a written recommendation that survives a second set of eyes.
How Texas changes the numbers
Texas does not tax conversion income or IRA withdrawals.
How a conversion is actually taxed
The converted dollars are added to the rest of that year’s taxable income.
The years the math is usually kind
The gap between retirement and RMDs (now starting at age 73 for most people under SECURE 2.
The all-at-once conversion
Converting $400,000 in one year to “be done” can push ordinary income through 32% or 35%, trigger IRMAA at the high brackets, and — in a state that taxes ordinary income — add a state bill on top.
Care, Medicaid, and the long stay
Texas Medicaid long-term-care eligibility uses a five-year look-back.
How we actually work with you
Reduced Risk is a licensed service-area practice (TX LIC. 2357269). We work with Houston households by phone and secure video. There is no Houston branch office — and we will not invent one in schema or on the page.