Originally published May 2016. Last updated March 2026.
A Roth IRA conversion means moving money from a traditional IRA (or other pre-tax retirement account) into a Roth IRA. You pay income tax on the converted amount now, and in return, the money grows tax-free and comes out tax-free in retirement.
There’s no income limit on conversions. Anyone can do one. The question is whether you should.
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When a Roth Conversion Makes Sense
You’re in a temporary low-tax bracket
The sweet spot for conversions is often between retirement and when RMDs start (age 73 or 75). Your employment income has stopped, Social Security may not have kicked in yet, and your taxable income is relatively low. Converting in these years means paying tax at a lower rate than you’d pay later.
You expect higher tax rates in the future
If you believe Congress will raise rates (or if the Tax Cuts and Jobs Act expires as scheduled after 2025, returning to higher brackets), locking in today’s rates through conversion could save you money.
You want to eliminate RMDs
Traditional IRAs require minimum distributions starting at 73/75. Roth IRAs don’t, ever, during your lifetime. Converting reduces your traditional IRA balance and therefore your future RMDs.
You want to leave tax-free money to heirs
Inherited Roth IRAs are still subject to the 10-year rule for most non-spouse beneficiaries, but the distributions are tax-free. Inheriting a traditional IRA means your heirs pay income tax on every dollar they withdraw. A conversion shifts that tax burden from them to you.
When a Roth Conversion Doesn’t Make Sense
- You’re in your peak earning years. Converting on top of a high salary means paying tax at the highest marginal rates. Wait for a lower-income year.
- You’ll need the converted money within five years. Each conversion has a five-year waiting period before you can access the converted principal penalty-free (if you’re under 59 and a half).
- You’d have to use IRA funds to pay the tax. The whole point is to let the Roth grow. If you’re pulling money from the IRA to cover the tax bill, you’re undermining the benefit. Pay the tax from other funds.
- The conversion would push you into a significantly higher bracket. Partial conversions, spread over several years, often work better than one large conversion.
How to Think About the Math
A conversion makes sense when your tax rate now is lower than your expected tax rate on future withdrawals. That’s the basic equation.
But there are secondary effects to model:
- Higher income in the conversion year could increase Medicare premiums (IRMAA) two years later
- Conversion income can make more of your Social Security taxable
- Reducing your traditional IRA balance now means lower RMDs later, which lowers your taxable income for the rest of your life
We model these projections year by year for clients. The right conversion amount isn’t “convert everything” or “convert nothing.” It’s usually “convert up to the top of the 22% or 24% bracket each year for five to seven years.”
2025 Conversion Rules
- No income limit on conversions (anyone can convert)
- No limit on the amount you convert
- You cannot undo a conversion (the “recharacterization” option was eliminated in 2018)
- The converted amount is added to your taxable income for the year
- You can convert from traditional IRA, SEP IRA, SIMPLE IRA (after two years), or old 401(k)/403(b) accounts
FAQ
Can I convert my 401(k) directly to a Roth IRA?
If you’ve left the employer, yes. You can roll the 401(k) directly into a Roth IRA. Some active 401(k) plans also allow in-plan Roth conversions. Check with your plan administrator.
How much should I convert?
Enough to fill up your current tax bracket, but not so much that you jump into the next one. Partial conversions over several years usually beat one big conversion. A financial advisor can model the optimal amount based on your projected income and tax brackets.
What about the pro-rata rule?
If you have pre-tax and after-tax money in traditional IRAs, the IRS treats all your traditional IRAs as one pool for conversion purposes. You can’t cherry-pick just the after-tax dollars. This matters for backdoor Roth strategies.
Schedule a free 20-minute consultation to model whether a Roth conversion makes sense for your situation and how much to convert.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
