TL;DR: A Roth IRA can be a powerful retirement strategy, and understanding the benefits of a Roth conversion helps investors decide if it fits their long-term plan. This blog explains how conversions work, key advantages and drawbacks, and when timing and tax planning matter most.
Main points:
- Tax-free withdrawals in retirement and no required minimum distributions (RMDs)
- Opportunity for tax diversification and potential savings if future tax rates rise
- No income limits for conversions, making it accessible to high earners
- Key downsides include immediate tax liability, possible higher tax bracket, and Medicare impacts
- Strategic timing—such as year-end planning or during market downturns—can improve outcomes
There are several benefits of a Roth conversion when it comes to retirement savings. In a perfect world, retirees should have 100% of their money in Roth accounts because they are “after-tax” accounts.
Having an after-tax account means you pay taxes prior to putting money in, so you do not have to pay taxes when you withdraw. Unfortunately, Roth accounts often aren’t taken advantage of enough because they can be confusing.
Money from pre-tax qualified accounts can be transferred into a Roth IRA. This process is a Roth conversion, and there are a few questions to consider before taking this step. More knowledge about the benefits of Roth conversion and the pros and cons of Roth conversions can clarify if this strategy fits your retirement plan.
Pros and Cons of a Roth Conversion: What You Need to Know
These advantages highlight the long-term benefits of a Roth conversion for retirement planning:
- Tax-free withdrawals in retirement
- No required minimum distributions (RMDs)
- No income limits on Roth IRA conversion, allowing high earners to participate
- Greater tax diversification across retirement accounts
- Potential savings if future tax rates increase
These drawbacks reflect the pros and cons of a Roth conversion and why careful planning matters:
- Immediate tax bill on the converted amount
- Possible higher tax bracket in the conversion year
- Impact on Medicare premiums or other tax thresholds
- Complex Roth IRA conversion rules to follow
- Requires available cash to pay taxes upfront
When Is the Right Time for a Roth IRA Conversion?
There are two times I recommend a Roth Conversion:
- End of the Year: It’s wise to consider a Roth Conversion in December, when you can take the events of the entire year into account.
- Events in Washington: Waiting until year-end minimizes legislative risk. You can consider any new laws that are passed that could impact whether the timing is right for you.
- Life events: Any big financial swings, like a medical emergency or a downpayment on a new home, could shift you into a different tax bracket. Doing a Roth Conversion early in the year can limit your options.
- During a Market Decline: When the market is in a pullback that you believe to be temporary, you can buy in at the bottom, convert to a Roth IRA and watch the growth. Imagine making this move in March of 2020 when the Dow Jones dropped 37% only to quickly rebound! More recently, market volatility in 2022–2025, including significant swings in the Dow Jones Industrial Average, has created similar opportunities for investors considering when to convert traditional IRA to Roth accounts at lower valuations.
Can You Afford the Taxes on a Roth Conversion?
Anyone under age 59 1/2 will have to pay a 10% excise penalty on the money they convert to a Roth IRA. We are in the most efficient tax window in history right now, which was scheduled to sunset at the end of 2025.
It’s also important to understand that while there are no income limits on a Roth IRA conversion, the amount converted is still taxable as income. Following the expiration of certain provisions from the Tax Cuts and Jobs Act at the end of 2025, tax rates may be higher in the coming years, which makes evaluating whether is a Roth conversion worth it even more relevant today.
We are advising clients to take advantage of these tax breaks, if they have the funds to cover the tax hit.
Roth IRA Conversion Rules and Tax Planning Strategies: How Do they Fit into Your Plans?
You can do a Roth Conversion on your own—just sign a form, indicate the amount and you’re done. But, I don’t recommend it. While it may seem simple to convert traditional IRA to Roth, the broader tax impact can be more complex than it appears. There are some strategies you should avoid, depending on your situation.
There are potential pitfalls you may not be aware of—you may be subject to the Net Income Investment Tax or your Medicare costs could be penalized when you cross a certain income threshold. These are things you may not realize unless you are taking your overall tax plan into account. Carefully reviewing the pros and cons of Roth conversion within your full financial picture is essential before making a decision. On top of that, there’s the pro rata rule that you should also consider.
Does A Roth Conversion Make Sense for You?
At Asset Preservation Tax & Retirement Services, we have a tax office so we can tax plan. We use real tax software that looks at all the implications of a Roth Conversion so we can see all of the effects. This eliminates the guesswork and gives clients peace of mind.
The future is unpredictable. A number of factors— persistent inflation trends, global energy market shifts, ongoing geopolitical tensions, and evolving central bank policies—could signal instability on the horizon. At Asset Preservation Tax & Retirement, we’ll be watching for opportunities a stock market decline could present. “Drop”—much like “Roth”—isn’t necessarily a four-letter word.
Frequently Asked Questions?
What is the downside of a Roth conversion?
The main downside is the immediate tax bill. When you convert from a pre-tax account to a Roth IRA, the amount converted is treated as taxable income, which could push you into a higher tax bracket. It may also impact Medicare premiums or trigger additional taxes like the Net Investment Income Tax. Plus, you need available cash to pay those taxes upfront.
What is the best age to do a Roth conversion?
There’s no one-size-fits-all age, but many people benefit from converting in lower-income years—often between retirement and age 73 (before required minimum distributions begin). Younger investors or those expecting higher future tax rates may also benefit from earlier conversions.
Are Roth conversions going away in 2026?
Roth conversions are not scheduled to go away in 2026. However, current tax rates from the Tax Cuts and Jobs Act are set to expire after 2025, which could lead to higher tax rates. That’s why many investors are considering conversions now while tax rates are relatively lower.
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
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