Roth Conversions

What a conversion actually is

A Roth conversion moves money from a traditional IRA or 401(k) into a Roth account. The amount you move gets added to your taxable income this year. You’re settling up with the IRS now. In exchange, that money (and all its future growth) becomes tax-free, and it’s no longer subject to required minimum distributions during your lifetime.

So a conversion is a trade: a known tax bill today for no tax bill ever again on that money. Whether the trade is good depends almost entirely on the rate you pay today versus the rate you’d otherwise pay later.

The window that makes it work

For many people there’s a stretch (often between retiring and starting Social Security and required withdrawals) when taxable income drops to almost nothing. Career income has stopped; forced income hasn’t started. For a few years, the lowest tax brackets are sitting there, mostly unused.

That’s the classic conversion window. For illustration: a couple retiring at 62 with modest interest income might fill the rest of the 12% bracket with conversions each year for several years: moving six figures out of their traditional IRA at 12%, money that would otherwise have come out at 22% or higher once RMDs and Social Security stack up in their 70s. Same money, meaningfully different lifetime tax bill.

Why converting can beat waiting

Left alone, a large traditional IRA keeps growing, and so does the tax problem inside it. In your 70s, required minimum distributions force that money out on the IRS’s schedule, whether you need it or not. Big RMDs can push you into higher brackets, make more of your Social Security taxable, and trigger Medicare premium surcharges. And when one spouse dies, the survivor often pays tax on nearly the same income at single-filer rates: a quiet penalty few people see coming.

Converting during the low-income window shrinks the future RMDs, spreads the tax over your cheapest years, and leaves behind Roth money that’s tax-free to you and, eventually, to your kids, who would otherwise inherit your tax bill along with the account.

What to watch before converting

• The tax is due now, in real money: ideally paid from cash outside the IRA, so the full converted amount keeps growing.
• Brackets are edges, not suggestions. Converting $10,000 too much can spill into the next bracket, raise Medicare premiums two years later (IRMAA), or affect ACA health-insurance subsidies before 65. The size of each year’s conversion is the whole game.
• Conversions are permanent. There’s no undo. That’s why they’re usually done in measured annual slices, not one big leap.
• This is genuinely personal. The right amount, in the right year, depends on your full picture, which is exactly the kind of math we sit down and do with people, before anything is moved.