Let's say it's a $100,000 IRA being converted. Some people won't be able to pay the taxes on that, so they'll put $80,000 in the Roth and save $20,000 to pay the taxes. Bad idea.
"Money that's converted is exempt from penalties," says Slott. "But if you use part of it to pay the tax, there's a penalty if you're under 59½. It's something people don't think about -- and it's too late when the tax bill comes."
Trap No. 3: Other benefits could be lost
The money you convert from a traditional IRA counts as income on your taxes -- and that can impact your near-term future spending plans.
For example, if you're about to buy a home, converting to a Roth could cost you the $8,000 homebuyer tax credit being offered by the government. Or if your college-age child is looking for financial aid, the sudden surge in your income could dramatically hurt his or her chances.
Trap No. 4: Some premiums will increase
Those higher income levels from your conversion will also mean you take a hit on Social Security and Medicare premiums. The threat of that could scare people away from converting, but that's the real trap.
Those higher premiums aren't as bad as they seem. Yes, you'll take a hit for a year or two, but you'll never have to deal with them again. If you stick with a traditional IRA, you'll have to pay higher premiums for both programs every year once you hit 70½.