A Roth conversion is the process of moving money from a traditional retirement account—such as a Traditional IRA, SEP IRA, SIMPLE IRA, or even a 401(k)—into a Roth IRA. The key difference is when you pay taxes. With traditional retirement accounts, contributions are often tax-deferred, meaning you pay taxes later when you withdraw funds in retirement. With a Roth IRA, contributions are made with after-tax dollars, and future withdrawals are tax-free (as long as certain conditions are met).

In short: a Roth conversion allows you to pay taxes now so you can enjoy tax-free growth and withdrawals later.

• Move Funds – Transfer money from a traditional IRA, 401(k), or other eligible account into a Roth IRA.

• Pay Taxes – The converted amount counts as income for the year, so you’ll owe ordinary income taxes on it.

• Enjoy Tax-Free Growth – Once inside the Roth, the account grows tax-free, and withdrawals are free of federal income taxes if rules are met.

• You expect to be in a higher tax bracket later in retirement.

• You have a year with lower-than-usual income (making conversion taxes cheaper).

• You want to eliminate RMDs and keep control over your retirement income.

• You want to leave tax-free money to heirs.

Tax Bill: You’ll owe taxes in the year of conversion. It’s best if you can pay those taxes with money outside of the retirement account.

• • Impact on Medicare/Taxes: Conversion income could temporarily push you into a higher tax bracket or increase Medicare premiums.

  • Time Horizon: Roth conversions generally benefit those who have years (or decades) before they need the money, allowing time for tax-free growth.

  • State Taxes: If you plan to move from a high-tax to a low-tax state, timing conversions strategically could save money.

• Partial Conversions: Instead of converting your entire account in one year (and creating a large tax bill), you can spread conversions across multiple years to stay in a lower tax bracket.

• Bracket Management: Convert just enough each year to “fill up” your current tax bracket.

• Early Retirement Window: Many people strategically convert between retirement and the start of Social Security/RMDs, when taxable income is often lowest.

• Case 1: A 55-year-old with $500,000 in a Traditional IRA expects higher tax rates in the future. By converting $50,000 per year over 10 years, they smooth out taxes, avoid being bumped into higher tax brackets, and create a pool of tax-free retirement income.

• Every situation is unique. The right decision depends on:

  • Your current and future tax bracket

  • Your retirement income needs

  • Your estate planning goals

  Because Roth conversions involve tax law, it’s wise to consult with a financial advisor and tax professional before making a move.

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