“Roth Conversions: When They Make the Most Sense
Should I Do a Roth Conversion — and When?
Converting Traditional IRAs to Roth IRAs can sometimes help you save on taxes.
Everyone’s retirement horizon, risk tolerance, and lifestyle is different. But almost everyone wants to minimize taxes. If you expect to be in a lower tax bracket this year than you might in future years, a Roth conversion may be worth considering.
The benefits:
Converting while in a lower tax bracket lets you lock in today’s rates.
Over time, those savings compound year after year.
Roth IRAs grow tax-free, and qualified withdrawals are tax-free.
Important rules to remember:
You generally cannot take out the converted funds penalty-free until age 59½.
If you’re under 59½, you must also wait 5 years after the conversion for penalty-free withdrawals.
Taxes on earnings may still apply if it’s not a qualified distribution.
Why Consider a Roth Conversion?
Rebalance your investments while considering future legacy planning.
Pay less tax on converted assets today than you may in retirement.
Focus on assets with the most growth potential (e.g., stocks).
Achieve greater after-tax retirement income and potentially leave a larger legacy.
Focused Conversions (Planning Strategy)
A “focused conversion” is a technique designed to improve after-tax returns on traditional IRA assets.
Key steps:
Convert during a year when you’re in a lower tax bracket.
Determine the right amount to convert without pushing yourself into a higher bracket or Medicare surcharge.
Convert investments with the highest growth potential.
Events That May Put You in a Higher Tax Bracket Later
Required Minimum Distributions (RMDs)
Loss of deductions (mortgage interest, dependents, etc.)
Pension income stacking on top of Social Security
Social Security becoming taxable
Losing credits (e.g., Child Tax Credit, education credits)
Higher investment income (dividends, interest, capital gains)
Moving to a higher-tax state
Working part-time or consulting in retirement
Future tax law changes
One-time income events (inheritance, property sales)
Events That May Put You in a Lower Tax Bracket Temporarily
Job loss or reduced wages
Retirement mid-year (earning only part of your salary)
Unpaid leave or sabbatical
Business downturn if self-employed
Major medical expenses creating deductions
Large charitable contributions
Casualty or disaster losses
Moving to a lower-tax state
Realizing large investment losses
Education-related credits
Divorce or filing status changes
Years before RMDs begin
Delaying Social Security benefits
Large business deductions or depreciation
Disaster or pandemic relief programs
👉 These situations usually create only a short-term dip in taxable income.
Watch Out for These Lost Deductions & Credits When Your AGI Increases
Additional Standard Deduction for Seniors (Age 65 or Older) or the Blind-Check out this YouTube video to learn more
Child Tax Credit (CTC)
Child and Dependent Care Credit
Earned Income Tax Credit (EITC)
Education Credits (American Opportunity & Lifetime Learning)
Student Loan Interest Deduction
IRA deduction (if covered by an employer plan)
Saver’s Credit
Premium Tax Credit for health insurance
Medical expense deduction thresholds (harder to meet as AGI rises)
✅ In short: Roth conversions can be powerful, but timing is everything. Work with your tax preparer, or run your own projections, to see if this strategy can help you pay less in taxes and keep more in retirement.
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