Roth Conversions: When They Actually Make Sense
If you're sitting on a large pre-tax retirement account, you've probably heard of Roth conversions. The idea sounds appealing—pay taxes now to enjoy tax-free growth later. But the reality is more nuanced.
Roth conversions can be a smart move. But they’re not for everyone, and not at every time.
Here’s when they actually make sense:
✅ You’re in a low-income year Maybe you sold a business last year, retired early, or have a temporary dip in income. If your current tax bracket is lower than what you expect in retirement, converting now could mean paying less tax overall.
✅ You’re bridging the gap between retirement and RMDs If you’ve retired but haven’t hit age 73 yet, you’ve got a tax planning window. During this period, Roth conversions can shift money out of traditional accounts without pushing you into higher tax brackets.
✅ You’re managing future RMDs Required Minimum Distributions (RMDs) can inflate your tax bill later in life. Converting now reduces your future RMDs and the tax burden they create.
✅ You’re creating tax-free assets for heirs Roth IRAs aren’t subject to RMDs during your lifetime and offer tax-free distributions to your heirs (within 10 years). That can be powerful if you're planning a legacy.
✅ You’re funding long-term tax-free growth If you don’t need the money soon, letting it grow in a Roth for 10+ years can outweigh the upfront tax cost—especially if the account grows significantly.
When Roth conversions don’t make sense:
You're in a high tax bracket now and expect lower taxes later
You don’t have enough cash to pay the tax bill from outside the account
You’ll need the money in under 5 years (Roth rules penalize early withdrawals)
You're already bumping up against Medicare IRMAA brackets or ACA subsidy cliffs
How to think about timing
Roth conversions are best modeled on a year-by-year basis. Good planning means “filling up” the right tax brackets—not blindly converting large sums. It’s tax arbitrage, not guesswork.
What to do next
If you’re wondering whether a Roth conversion fits into your plan this year, we run multi-year tax projections to map it out. That includes:
Estimating your future RMDs
Projecting your lifetime tax bill under different strategies
Coordinating with your broader retirement and estate goals
Related: How To Be a Roth IRA Millionaire: A Roadmap to Tax-Free Wealth
Visit my site -> finnprice.com
Business Owner Education on a Weekly Basis -> Newsletter
Subscribe to the Youtube Channel for more video content -> Finn Price Youtube
About the author: Finn Price, CPFA, CEPA, is a business owner and wealth manager at Railroad Investment Group. He helps successful entrepreneurs & individuals with concentrated stock positions in their 30s, 40s and 50s build, organize, protect and transfer their wealth.
Note: this article is general guidance and education, not advice. Consult your money person or your attorney for financial, tax, and legal advice specific to your situation.
Securities and advisory services offered through LPL Financial, a registered investment Advisor, Member FINRA/SIPC.
