When you think about retirement savings, you probably picture traditional IRAs or 401(k)s. These accounts let you defer taxes now, with the understanding that you’ll pay them later in retirement.

But what if you could flip that around and pay taxes today in exchange for tax-free income down the road?

That’s exactly what a Roth conversion offers.

What Is a Roth Conversion?

A Roth conversion is the process of moving money from a pre-tax retirement account, such as a Traditional IRA or 401(k), into a Roth IRA.

When you convert, you’ll pay income taxes on the amount you move in the year of the conversion. But here’s the big advantage: once the money is inside your Roth IRA, all future growth and qualified withdrawals are completely tax-free.

Why Consider a Roth Conversion?

The decision often comes down to one key factor: your future tax rate.

Roth conversions tend to make sense if you believe your tax rate today is lower than it will be in retirement. That could be the case if:

• You’re in a low-income year—perhaps between jobs, on sabbatical, or early retired before Social Security kicks in.
• You expect higher income in retirement from pensions, Social Security, or part-time work.
• You believe tax rates in general will rise in the future.

Key Factors to Consider

Roth conversions aren’t one-size-fits-all. Here are some important questions to ask yourself before making a move:

Can you pay the taxes from outside accounts?

Ideally, use cash from a savings or brokerage account. That way, the full converted amount stays in your Roth IRA to grow tax-free.

How long until retirement?

The longer your money has to grow inside the Roth, the more valuable the conversion becomes.

What’s your current vs. future tax bracket?

Be careful not to push yourself into a higher bracket with the conversion.

Will it affect other benefits?

A conversion increases your adjusted gross income (AGI), which may affect Medicare premiums (IRMAA) or eligibility for certain credits.

The 5-Year Rules You Need to Know

Roth IRAs come with two important five-year rules:

1. The 5-Year Rule for Conversions: Each conversion must remain in the Roth for five years (starting January 1 of the year you converted) before you can withdraw it tax- and penalty-free.
2. The 5-Year Rule for Earnings: To withdraw earnings tax-free, you must have had any Roth IRA open for at least five years and be age 59½ or older. Otherwise, you may face taxes and a 10% penalty.

Is a Roth Conversion Right for You?

Roth conversions can be one of the most powerful tools for retirement planning—but only if timed and executed carefully. For some, it may create a tax-efficient way to enjoy a fully tax-free retirement. For others, the upfront tax hit might outweigh the benefits.

The best way to know? Work with a financial professional who can run the numbers and help create a personalized strategy.