Roth IRA: Convert Now or Pay Later?
Why the tax-code change should put a hurry-up on your decision to convert a traditional IRA into a Roth.


The wait is over.
If you were delaying your plans to do a Roth conversion until you knew for sure that President Trump could deliver on his tax cut promises, you have your answer.
Now is the time. And the clock may be ticking. It’s likely these low tax rates won’t last until you retire — even if your retirement isn’t all that far off.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
That’s because even though it may be great for the short term, most economic models, including that of Congress’ own Joint Committee on Taxation, show this tax plan will add at least $1 trillion to the nation’s debt over the next decade.
The problem is the government keeps kicking our debt can down the road, leaving it for some future generation to figure out. Meanwhile, the amount keeps growing — and it’s already more than $20 trillion, making it the largest national debt in the world.
And if the Fed continues to raise interest rates, the rates on government securities also will rise, which could add to the problem.
There are only a few ways this staggering burden can be reduced:
- The government can cut spending. (But it doesn’t like that idea much.)
- It can drive economic growth at a faster rate than the debt. (Republicans say this tax cut will accomplish that.)
- Or it can raise revenue by raising taxes.
If that happens and you’ve accumulated a hefty sum in your traditional IRA or 401(k) — as most workers have been trained to do over the past three decades — you could be in for a nasty surprise when you’re ready to withdraw those tax-deferred funds. (Or when you’re forced to take required minimum distributions at age 70½.)
And there’s no telling when a tax increase could happen. It could be in three years, if Trump isn’t re-elected — or maybe 10 or 20 years from now.
Think of this as a fire sale. We’re going to have much lower tax rates for at least the next few years. If you file a joint return, you can make as much as $315,000 and still be in a 24% tax bracket. So there’s a lot of room to start moving money out of traditional retirement plans and into a tax-free Roth.
Of course, to do that, you’ll have to pay the taxes on the money you withdraw now. But you should ask yourself: Would I rather pay 24% now or potentially pay 40%, 50% or more in the future?
Those percentages aren’t unprecedented.
Right now, for 2018, the highest rate you can be taxed at is 37%. In 1917, the highest tax rate jumped from 15% to 67% — and to 77% in 1918. In 1932, Congress raised taxes on top earners from 25% to 63%. And in 1944, the top rate peaked at 94% on taxable income over $200,000.
If you’ve been a diligent saver — putting money into your tax-deferred account for years and building a significant nest egg — this is an important decision to make, and the window could be narrow. Talk to your tax accountant and/or financial adviser now about the advantages of a Roth conversion and how it would fit in your overall retirement plan.
Kurt Supe and John Culpepper offer securities through cfd Investments, Inc., Registered Broker/Dealer, Member FINRA & SIPC, and Kurt Supe offers advisory services through Creative Financial Designs, Inc., Registered Investment Adviser. Creative Financial Group is a separate unaffiliated company. The CFD Companies do not provide legal or tax advice. Neither Creative Financial Group nor the CFD Companies are associated with SmartVestor or Ramsey Solutions. Neither SmartVestor nor Ramsey Solutions recommend or make an endorsement for services provided under the SmartVestor program.
Kim Franke-Folstad contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Kurt Supe is a certified public accountant and financial adviser as well as senior partner and co-founder of Creative Financial Group (www.creativefinancialgrp.com). He holds a bachelor's degree in finance from the University of Kentucky and has nearly 20 years of experience in the financial services industry.
-
Ask the Editor — Tax Questions on Inherited IRAs
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the rules on inheriting IRAs.
-
I Asked Experts When It's Worth Splurging on Beauty and Skincare — and When You Can Save
Smart Shopping Experts agree that while you don't have to spend three figures on your products, some higher-priced items have value.
-
Retiring Early? This Strategy Cuts Your Income Tax to Zero
When retiring early, married couples can use this little-known (and legitimate) strategy to take a six-figure income every year — tax-free.
-
Ditch the Golf Shoes: Your Retirement Needs a Side Gig
A side gig in retirement can help combat boredom, loneliness and the threat of inflation eroding your savings. And the earlier you start planning, the better.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet Spot
Converting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
-
A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
If debt has you spiraling, now is the time to take a few common-sense steps to help knock it down and get it under control.
-
I'm an Insurance Expert: This Is How Your Insurance Protects You While You're on Vacation
Here are three key things to consider about your insurance (auto, property and health) when traveling within the U.S., including coverage for rental cars, personal belongings and medical emergencies.
-
Stock Market Today: It's 'Most Sectors Go' Ahead of Independence Day
The resilience trade continues to work, even for sectors and stocks with specific uncertainties.
-
Investing Professionals Agree: Discipline Beats Drama Right Now
Big portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This Instead
Yes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.