You’ve likely heard of Roth IRAs and the idea of a Roth conversion—but is it right for you?
For individuals and couples nearing retirement or already retired, a Roth conversion can be a smart tax strategy. But it’s not one-size-fits-all. In some situations, it can reduce your lifetime tax bill and increase your after-tax income. In others, it could trigger an unnecessary tax burden.
So, when does a Roth conversion make sense? Here’s what you need to know.
What Is a Roth Conversion?
A Roth conversion involves moving money from a pre-tax account (like a traditional IRA or 401(k)) into a Roth IRA. The catch? You pay income tax on the amount you convert in the year of the conversion. But after that, qualified withdrawals from the Roth IRA are completely tax-free.
Think of it as paying taxes now to avoid potentially higher taxes later.
When a Roth Conversion Makes Sense
✅ 1. You're in a Lower Tax Bracket—For Now
If you’ve recently retired but haven’t started taking Social Security or required minimum distributions (RMDs) yet, you may be in a temporary “low tax window.”
This can be an ideal time to do partial Roth conversions and “fill up” lower tax brackets.
Example:
You’re married and retired at 62. You have no earned income, and you haven’t started Social Security. You might be able to convert $30,000 or more into a Roth IRA and stay within the 12% or 22% tax bracket—potentially saving thousands over the long term.
✅ 2. You Expect Higher Taxes in the Future
If you believe tax rates will rise—either due to personal income changes, expiring tax laws, or national fiscal policy—a Roth conversion lets you lock in today’s lower rates.
Also, if you’re married and your spouse passes away, you may find yourself in a higher single filer tax bracket. A strategic conversion now can reduce the tax burden on your future self or your surviving spouse.
✅ 3. You Want to Reduce Future RMDs
Traditional IRAs and 401(k)s require you to start taking RMDs at age 73 (rising to 75 in future years). These withdrawals are taxable and can:
Push you into a higher tax bracket
Increase Medicare premiums
Impact taxation of your Social Security
Roth IRAs, however, have no RMDs during your lifetime. Converting some funds now can reduce the size of your traditional IRA and give you more control over future taxes.
✅ 4. You Want to Leave a Tax-Free Inheritance
Roth IRAs are powerful estate planning tools. Heirs who inherit a Roth IRA must still withdraw the funds within 10 years, but they generally won’t owe taxes on those withdrawals.
A Roth conversion allows you to pay the taxes now—potentially at a lower rate—so your loved ones don’t have to.
When It Doesn’t Make Sense
While Roth conversions can be a great strategy, they aren’t always the right move:
You don’t have cash outside your IRA to pay the taxes
You're already in a high tax bracket
You’ll need the funds from your IRA in the next few years (less time for tax-free growth)
This is why partial conversions—done over several years—are often more effective than converting everything at once.
Bottom Line
Roth conversions can be a powerful retirement planning tool—but timing and strategy are everything.
If you’re recently retired or within five years of retirement, now is a great time to evaluate whether a Roth conversion fits into your long-term tax and income plan.
Want to know if a Roth conversion makes sense for you?
At Obsidian Wealth Advisors, we help individuals and couples approaching or in retirement make tax-smart decisions with confidence. Let’s take a look at your retirement picture and create a custom conversion strategy that aligns with your goals.