Converting a traditional individual retirement account to a Roth IRA is a powerful way to reduce taxes in retirement. Essentially, you’re choosing to pay taxes now in exchange for tax-free withdrawals later.
That’s often beneficial, but there are some pitfalls to avoid. Retirement savers should understand all the financial and tax implications before making the move.
To begin a Roth conversion, contact your IRA custodian and request a transfer of funds from a traditional IRA or 401(k) into a Roth IRA.
You can choose to convert cash or simply transfer the assets in the account. Your custodian will report the transaction to the IRS on Form 1099-R. Once the conversion is complete, you’ll owe ordinary income tax on the amount moved.
[Read: What the Rothification of Retirement Accounts Means for You]
Don’t Push Yourself into a Higher Tax Bracket
Before initiating a conversion, it’s a good idea to check with a financial planner or tax advisor to avoid unintended consequences.
“Sometimes, in an effort to do the smart thing, people overdo Roth conversions,” said Brennan Decima, managing director of Decima Wealth Consulting in St. Petersburg, Florida, in an email.
“Converting too much in one year can push you into a higher tax bracket, trigger Medicare premium surcharges or even reduce eligibility for certain tax credits,” he added.
“If you’re not careful, you could end up paying more tax now than you or your spouse would ever pay in the future,” he added. “The sweet spot often lies in partial conversions over several years, rather than an all-at-once strategy.”
By converting gradually, you can avoid the trap of a higher tax bracket and the income-related monthly adjustment amount. That’s an extra charge on Medicare Part B and Part D premiums for people with higher incomes.
You don’t want to risk a bigger tax bill than you’d face if you’d simply left your money in a traditional account. A smarter approach is often to spread conversions over multiple years, staying within lower tax brackets.
[Read: Tax Changes You Can Expect in Retirement]
Time Your Roth Conversions Wisely
There are no income limits or maximum amounts for conversions, but the tax timing is everything. There are also some important nuances to keep in mind.
“I typically recommend converting only what can be taxed efficiently in the current year and, when possible, using non-retirement assets to pay the tax,” said Kevin Newbert, a financial advisor at Ausperity Private Wealth in Moorestown, New Jersey, in an email.
“This allows the full converted amount to remain invested and grow tax-free within the Roth,” he said.
“Beyond taxes, a well-timed conversion can provide greater flexibility and control over income in retirement, particularly when coordinated with Medicare thresholds and Social Security planning.”
The Effect on Future Withdrawals
Roth conversions reduce the account balance that’s subject to future RMDs from a traditional IRA. In turn, that can lower a retiree’s tax burden during withdrawal years.
Jen Swindler, owner and advisor at Money Illustrated in Bluffdale, Utah, said she has concerns about projecting long-term cash flow, as many people will have no control over their tax situation once RMDs begin at age 73 or, in 2033, at 75.
“They’re often forced to distribute much more from their pretax accounts than they actually need to live off of,” she said in an email.
“A conversion strategy that often works really well for clients that have the majority of their assets in pretax accounts is to convert funds to Roth in the years between retirement and when RMDs begin,” she added, noting that there’s often a 10-year gap between retirement and the time investors are required to make withdrawals.
“These years often have a lower tax liability than the final working years of their career, as well as a lower liability than future RMD years will generate,” she said.
[Related:7 Things to Know About Withdrawing Money From a Traditional IRA]
Consider a Surviving Spouse’s Tax Bracket
Planning for a surviving spouse’s tax bracket is an overlooked benefit of a Roth conversion. “A Roth conversion can be a powerful tool to protect the surviving spouse,” Decima said.
“Today, you might be filing jointly, but after one spouse passes, the survivor will likely be bumped into a higher tax bracket filing as a single person,” he added. “Converting some funds to a Roth now, while you’re in a lower joint bracket, can reduce the tax burden your spouse may face later and give them one less thing to worry about.”
Married couples should analyze all their current forms of income, said Cristina Guglielmetti, a financial planner with Future Perfect Planning in Brooklyn, New York, in an email.
“How much would go away when one spouse dies? If a lot of the income would stay in place, it becomes advantageous to convert, because you’re avoiding paying tax later on the same amount of income but at higher single rates,” she said. “Morbid but important to consider!”
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How to Convert to a Roth IRA originally appeared on usnews.com
Update 08/08/25: This story was published at an earlier date and has been updated with new information.
