A Roth conversion moves money from a taxable retirement account to a tax-free one. Done at the right time, it is one of the highest-return tax strategies available. Done at the wrong time, it costs more than it saves. Here is how to know the difference.
A Roth IRA conversion makes sense when your current tax rate is lower than your expected future tax rate. The best times to convert: years with temporarily lower income (between jobs, early retirement, years with large deductions), under the OBBBA extended provisions that may increase rates, and when you have significant traditional IRA assets that will generate large Required Minimum Distributions.
A traditional IRA grows tax-deferred — you pay taxes when you withdraw. A Roth IRA grows tax-free — you pay taxes when you contribute (or convert), and all future growth and withdrawals are tax-free.
A Roth conversion is the process of moving money from a traditional IRA to a Roth IRA. You pay income tax on the converted amount in the year of conversion. In exchange, all future growth and withdrawals are tax-free.
Lower Income Years: If your income is temporarily lower — between jobs, in early retirement before Social Security starts, or in years with large deductions — you may be in a lower tax bracket than you will be in the future. Converting in those years means paying taxes at a lower rate.
Before 2026 Tax Law Changes: The One Big Beautiful Bill Act (OBBBA) reduced tax rates across all brackets. If Congress does not extend these provisions, rates will increase in 2026. Converting before the rate increase means paying taxes at the current lower rates.
Before RMDs Begin: Required Minimum Distributions begin at age 73. If you have a large traditional IRA, RMDs can push you into a higher tax bracket and trigger Medicare surcharges. Converting before RMDs begin reduces the future RMD burden.
For Heirs: Roth IRAs do not have RMDs during the owner's lifetime. Inherited Roth IRAs must be distributed within 10 years, but those distributions are tax-free. Converting to a Roth is one of the most powerful gifts you can give your heirs.
The Math: You convert $100,000 from a traditional IRA to a Roth IRA. You pay $22,000 in taxes (22% bracket). The $100,000 grows to $400,000 over 20 years. From a traditional IRA, you would owe taxes on all $400,000 when you withdraw — potentially $88,000–$148,000. From the Roth, you owe nothing. The conversion saved $66,000–$126,000 in taxes.
Partial Conversions: You do not have to convert your entire traditional IRA at once. A partial conversion strategy — converting just enough each year to fill up a lower tax bracket — is often the most tax-efficient approach.
Many people convert too much in a single year, pushing themselves into a higher tax bracket and triggering Medicare surcharges. A partial conversion strategy, coordinated with the CPA, is almost always more tax-efficient than a single large conversion.
Converting in a high-income year can push you into a higher tax bracket, making the conversion more expensive than it would be in a lower-income year.
The converted amount is added to your income and can trigger Medicare surcharges (IRMAA) two years later.
If you need to withdraw the converted funds within five years, you may owe a 10% penalty.
State income taxes apply to Roth conversions in most states — the federal analysis may look different from the combined federal and state analysis.
Roth conversion strategy is a core component of the Mini Family Office investment strategy. The annual coordination meeting between the attorney, CPA, and financial advisor is the ideal time to model the optimal conversion amount for the year — taking into account current income, expected future income, RMD projections, and the 2026 tax law changes.
A private foundation or donor-advised fund can be used in conjunction with a Roth conversion strategy. By making a large charitable contribution in the same year as a Roth conversion, the charitable deduction can offset some or all of the conversion income — reducing the tax cost of the conversion.
Roth IRA — tax-free retirement income
Traditional IRA — tax-deferred retirement savings
Roth Conversion Calculator — models the tax impact of different conversion amounts
IRMAA Brackets — Medicare surcharge thresholds to avoid
Donor-Advised Fund — charitable deduction to offset conversion income
Access our full research library for case law, IRS codes, and government sources supporting this topic.
View ResearchRoth conversion strategy requires careful coordination between your tax situation, your retirement accounts, and your estate plan. Our pro bono assessment evaluates whether a Roth conversion strategy makes sense for your situation.
Model your RMDs starting at age 73 — if they will push you into a higher bracket, start converting now to reduce the future burden.
Consider converting in the years between retirement and Social Security — income is often lower in those years, making them ideal for conversions.
Do not convert more than you can pay in taxes from non-IRA funds — using IRA funds to pay the conversion tax reduces the amount available to grow tax-free.
Coordinate with your CPA on the optimal conversion amount each year — the goal is to fill up the lower tax brackets without spilling into higher ones.
Roth conversion strategy intersects with estate planning — Roth IRAs do not have RMDs and provide tax-free income to heirs.
Coordinate with the client's CPA on the timing of conversions — the legal and tax implications intersect.
The 2026 tax law changes create urgency for Roth conversions — every client with a large traditional IRA should be evaluating this strategy now.
Inherited Roth IRAs must be distributed within 10 years under the SECURE Act — make sure clients understand the estate planning implications.
Estate Planning Hotline — c/o Estate Law Training Center / Law & Tax Foundation
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