A Roth conversion is the process of moving money from a traditional IRA (or 401k) into a Roth IRA. You pay income tax on the converted amount in the year of conversion — but from that point forward, the money grows tax-free and qualified withdrawals in retirement are tax-free. Done at the right time, a Roth conversion can significantly reduce your lifetime tax bill.
Related: What Is a QLAC?
Why a Roth Conversion Might Make Sense
The fundamental logic: if you expect your tax rate to be higher in retirement than it is today, paying taxes now at the lower rate is mathematically advantageous. Conversely, if your tax rate will be lower in retirement, it rarely makes sense to convert — you would be paying taxes early at a higher rate.
The situations where conversions make the most sense:
- Low-income years: A job loss, a sabbatical, the gap between retirement and Social Security claiming, or a year of large business deductions can all create windows where your effective tax rate is unusually low.
- Before required minimum distributions (RMDs) begin: Traditional IRAs require you to take taxable RMDs starting at age 73. A large IRA creates large forced withdrawals that can push you into higher brackets and increase Medicare premiums. Converting in your 60s reduces the RMD burden.
- Anticipating higher future tax rates: If you expect federal or state tax rates to rise, locking in today’s rates via conversion has strategic value.
- Estate planning: Roth IRAs have no RMDs during the owner’s lifetime, making them excellent assets to leave to heirs who can stretch distributions over 10 years of tax-free growth.
How the Tax Works
The converted amount is added to your ordinary income for the year. If you convert $20,000 in a year where your other income is $50,000, you are taxed as if you earned $70,000. There are no special rates — it is taxed at your marginal income tax rate.
Critical rule: do NOT withhold taxes from the converted amount. If the IRA custodian withholds 20% for taxes, that 20% is treated as a distribution — subject to income tax AND a 10% early withdrawal penalty if you are under 59½. Pay the conversion taxes from a separate taxable account, not from the IRA itself.
Partial Conversions and “Filling the Bracket”
You do not have to convert everything at once. Most effective Roth conversion strategies involve converting just enough each year to fill up your current tax bracket — but not so much that you push yourself into the next bracket. This is called bracket filling or bracket topping.
Example: A married couple with $80,000 in income and a standard deduction has roughly $14,000 of space before hitting the 22% bracket. They convert exactly $14,000 from their IRA — paying 12% on the conversion instead of potentially 22% or higher later.
Roth Conversion Rules
- No income limits on Roth conversions (unlike direct Roth IRA contributions)
- No limit on the amount you can convert in a single year
- Five-year rule: converted funds must stay in the Roth IRA for five years before withdrawal of that specific conversion amount, to avoid the 10% penalty (this is separate from the five-year rule for Roth contributions)
- Backdoor Roth: high earners above Roth contribution income limits ($161,000 single / $240,000 married in 2026) can make non-deductible traditional IRA contributions and then immediately convert — effectively contributing to a Roth regardless of income
When a Roth Conversion Does Not Make Sense
If converting pushes you into a significantly higher bracket, triggers IRMAA Medicare surcharges (which kick in at $106,000 single / $212,000 married), or if you will need the converted funds soon and cannot pay the tax separately, conversion may cost more than it saves. Run the numbers before converting.
Related: Inherited IRA Rules: The 10-Year Distribution Rule Explained (2026)