Guide · Roth conversions

Roth conversions: is now the right time?

How converting a traditional IRA to a Roth works, when it can make sense, and what it costs in taxes today.

How it works

A Roth conversion, in three steps.

Move itTransfer some or all of a traditional IRA or 401(k) into a Roth account.

Pay tax nowThe converted amount is taxed as ordinary income in the year you convert.

Grow tax-freeQualified withdrawals later are tax-free, and Roth IRAs have no required distributions for the original owner.

Free PDF · Roth Conversions

Track required minimum distributions and plan withdrawals.

When it can make sense

Lower-income years.Often the years between retiring and starting Social Security or RMDs.
You expect higher taxes later.Paying tax now at a lower rate can beat paying a higher rate on future withdrawals.
You want to shrink future RMDs.Smaller traditional balances mean smaller required distributions.
You plan to leave money to heirs.Roth money generally passes to heirs tax-free, though most must empty an inherited account within 10 years.

Watch-outs

The tax bill.Ideally paid from savings outside the IRA, so more stays invested.
Bracket creep.A large conversion can push income into a higher bracket. Converting in pieces over several years can help.
Medicare premiums.Conversion income can raise premiums two years later.
Social Security taxation.Extra income in the year you convert can make more of your benefit taxable.
No undo.Since 2018, a conversion can’t be reversed.
The five-year rule.If you’re under 59½, each conversion has its own five-year waiting period before converted dollars can be withdrawn without penalty.

Free Roth conversion webinar

Get your conversion questions answered live by Mary Garza.

No date is set yet. Leave your details and we will email you as soon as the next webinar or seminar is scheduled.

We’ll model a conversion amount against your bracket, Medicare premiums and Social Security.

This guide is general information, not tax advice for your situation. Rules and thresholds change; talk with a qualified professional before acting.

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