Wondering if a Roth conversion is worth it? Walk through the 7 questions a Cedar Falls CFP® uses to decide — taxes now vs. later, IRMAA, and what your heirs inherit.
Just about every week, someone sits down across from us and asks some version of the same thing: "So, should I be doing a Roth conversion?" It's a great question. And like most things in planning, the honest answer is: it depends. It depends on what this money is for, when you're going to need it, and how it's going to be used.
So let's back up for a second. A Roth conversion is simply moving money from a pre-tax account — your traditional IRA or 401(k) — over into a Roth IRA, and paying the income tax on that amount in the year you do it. That's it. You're voluntarily raising your hand and saying, "I'll pay the tax on this chunk now, so it can grow tax-free for the rest of my life and never get taxed again."
Here's why that matters. That big pre-tax account of yours is kind of a ticking time bomb. It looks great on a statement, but you've never paid tax on a dollar of it. Uncle Sam is a silent partner on every penny, and at age 73 the Required Minimum Distributions kick in whether you need the money or not. A Roth conversion is one of the main levers we have to pull to defuse that bomb a little at a time, on our terms instead of the government's.
There's an old line we like: the best time to plant a tree was 20 years ago, and the next best time is today. Same goes for conversions. But — and this is the important part — a conversion isn't right for everybody, and it's flat-out wrong for some people. So instead of guessing, let's walk through the same questions we walk through with clients.
Strip away all the jargon and a Roth conversion comes down to one bet: do you think your tax rate today is lower than the rate you (or your heirs) will pay down the road? If today's rate is lower, paying the tax now is a bargain. If today's rate is higher, you'd be paying a premium for no reason.
This is the part of our planning process we call Retain — how do we keep more of what you've built? It's not about chasing a higher return. It's about not leaving money on the table to taxes you didn't have to pay. We have to pay our share, but we don't have to leave Uncle Sam a tip.
For a lot of folks, there's a sweet spot. You retire in your early 60s, your paycheck stops, but your Social Security and RMDs haven't fully ramped up yet. For a handful of years you're sitting in a lower tax bracket than you'll ever see again. That low-income window is prime conversion territory — we can fill up the 12% or 22% bracket on purpose and move money to the Roth side at a discount. Let those years slip by unused and you don't get them back. Want the bigger picture on this? Our guide to 7 ways to lower taxes in retirement walks through how conversions fit alongside the other levers.
Let's use simple numbers. Say converting $50,000 this year keeps you in the 12% bracket — that's $6,000 in tax. If you wait, that same money comes out later as an RMD stacked on top of Social Security at, say, 24% — now it's $12,000. Same dollars, double the tax. That's the whole game. Does that make sense?
This is the actual decision tree we use, straight from the flowchart we license and hand to clients. None of these questions is a deal-breaker on its own — it's the whole picture together. Walk through them honestly.
If you're going to have to pull this money out to live on in the next few years anyway, the conversion math gets a lot weaker. Conversions shine when the money can sit and grow untouched. If it's funding next year's grocery bill, you're just pre-paying tax for no real benefit.
This is the big one people miss. The smart way to do a conversion is to pay the tax bill from a separate bucket — your checking or brokerage account — so 100% of the converted dollars land in the Roth. If you have to withhold the tax out of the conversion itself, and you're under 59½, that withheld piece can get hit with a 10% penalty, and you've shrunk the amount that actually makes it to the Roth. Cash on the side to cover the tax is almost a prerequisite.
Converted dollars need to season. If you'll need to tap that Roth money within five years of converting, you can run into penalties on the conversion amount. It's not usually a dealbreaker, but it's a "measure twice, cut once" item — especially if you're converting in your late 50s.
If you think your rates will be the same or lower down the road — either because your income drops or because of future tax law — then converting today at today's known rate is attractive. If you're convinced your rate will be much lower later, deferring may win. Nobody has a crystal ball here, but current tax rates are historically on the lower side, and that's worth weighing.
This is where conversions can bite you if you're not careful. A conversion adds to your taxable income for the year, and that can ripple into things tied to income: Medicare premiums (IRMAA), ACA health insurance subsidies, and college financial aid. IRMAA in particular is a cliff, not a ramp — go a dollar over a threshold and your Medicare premiums jump for the whole year. We map this out carefully so a conversion doesn't accidentally trigger a surcharge that eats the savings. We dug into this trap in our piece on how to avoid Medicare IRMAA surprises.
This is the part people forget: a conversion isn't just about you. If your beneficiaries are your kids and they're in their peak earning years, leaving them a big pre-tax IRA is leaving them a tax bill. Under the 10-Year Rule, most non-spouse heirs have to drain an inherited IRA within ten years — and if it's a traditional IRA, every dollar is taxable, often stacked on top of their highest-earning years. Inheriting a Roth instead means tax-free dollars. On the flip side, if your beneficiary is a charity, a conversion offers little benefit — that charity pays no tax anyway, so you'd be better off making Qualified Charitable Distributions during your lifetime. Our 2026 guide to QCDs covers that route.
Here's a green light a lot of people miss. When the market takes a downturn, your account values are temporarily low — which means you can convert more shares for the same tax bill, then ride the recovery tax-free inside the Roth. Same idea with expiring tax credits or carryforwards. A down market feels lousy, but it can be one of the best times to convert. It's one more reason we don't panic when the roller coaster dips.
I'll be honest with you, because that's our job — sometimes the answer is no, and we'll tell you so. A conversion is probably the wrong move if any of these are true:
In those cases, deferring the tax until distributions are actually needed — or required — is the smarter play. This is a judgment-free zone. The goal isn't to convert for the sake of converting. It's to make the decision that keeps the most money in your family's hands.
A Roth conversion is never a one-off decision made in a vacuum. It touches your spending plan, where your income comes from, the accounts you hold, your tax picture, and ultimately your legacy. That's the whole point of running it through a real planning process instead of a calculator.
What we actually do is build a multi-year conversion plan. Instead of one giant conversion that spikes your bracket and triggers an IRMAA surcharge, we usually convert smaller amounts over a series of years — filling up the lower brackets each year, staying under the surcharge thresholds, and watching for down-market opportunities along the way. It's the snowball, not the avalanche.
And remember, your tax preparer is looking in the rearview mirror — they tell you what already happened last year. Our job is to look forward through the windshield and set this up before the year closes. If you want to see how conversions sit next to RMDs, our guide on RMD planning and the retirement tax bomb is a good next read, and if retirement is close, walk through what to consider before you retire first. For the years your income is unusually low, pairing conversions with capital gains harvesting can stretch the win even further.
The official rules, if you want to nerd out, live on the IRS site — here's their FAQ on rollovers and Roth conversions and the RMD rules. For how a conversion can affect Medicare premiums, the Social Security Administration's Medicare page is the source.
A Roth conversion is one of the highest-leverage moves in retirement planning — and one of the easiest to get wrong if you eyeball it. Whether it's right for you comes down to your brackets, your cash, your beneficiaries, and your timing, and that's exactly the kind of puzzle we love to put together.
Want to walk through whether a conversion makes sense for your situation? Reach out and we'll send you our Roth conversion decision checklist, and you can grab a time on the calendar to talk it through — no pressure, no cost.
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It's moving money from a pre-tax account, like a traditional IRA or 401(k), into a Roth IRA and paying the income tax on that amount this year. In exchange, that money grows tax-free from then on and you never pay tax on it again — and neither do your heirs.
The converted amount gets added to your taxable income for the year, so the cost is the income tax at your marginal rate. Convert $50,000 while you're in the 12% bracket and that's roughly $6,000 in tax. The key is paying that tax from a separate account — not out of the conversion itself — so the full amount lands in the Roth.
There's often a sweet spot between when you retire and when RMDs and full Social Security kick in — frequently your early-to-mid 60s — when your income temporarily dips and you're in a lower bracket. That low-income window is prime conversion territory, but the right age depends entirely on your own tax picture.
Yes, but there's a catch. Once you're subject to RMDs, you have to take your Required Minimum Distribution first, and the RMD itself can't be converted — it has to come out as a taxable distribution. Anything above the RMD can then be converted.
It can. A conversion raises your taxable income, and Medicare's IRMAA surcharge is based on your income from two years prior. Go over a threshold and your Part B and Part D premiums jump for that year. IRMAA is a cliff, not a slope, so we plan conversions carefully to stay under the lines that matter.
Absolutely. It's usually the wrong move if you don't have outside cash to pay the tax, if you're confident your future tax rate will be much lower, or if your beneficiaries are charities or family in low brackets. Converting and paying tax today at a higher rate than you'd pay later just hands the IRS extra money.