With Taxes on Sale, Consider a Roth Conversion to Make the Most of Lower Rates
Judging whether you’re a good candidate for a Roth IRA conversion requires some thought, but if you answer yes to these three questions, it could be worth considering.


Financial professionals have long debated the pros and cons, timing and how-tos of converting a traditional IRA into a Roth IRA.
Is it a good idea for you? Unfortunately, the short answer is, “It depends.” The longer answer involves predicting your income and income-tax bracket over many years — something that isn’t easy to do.
3 Questions to Assess Your Own Situation
You’d be wise to tap into the knowledge of your own tax and financial advisers, maybe even your estate attorney, to help you look at your personal situation. But you can start by asking yourself these questions:

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.
If, like most people I talk to, your answer to all three questions is yes, then now may very well be the right time to explore converting some of your traditional IRA dollars to a Roth. Because, thanks to the 2017 Tax Cuts and Jobs Act, taxes are on sale.
No matter what you think about these tax reforms and what the long-range consequences will be for the country, the fact is that many people will pay less in taxes this year and until at least 2025. All the marginal tax brackets have been lowered except for couples and singles in the $400,000 range. And standard deduction amounts have increased to $12,000 for individuals, $18,000 for heads of household and $24,000 for married couples filing jointly and surviving spouses.
Fill Up Your Tax ‘Buckets’
Which means it’s time to take another look at your nest egg and how it’s built around the three tax “buckets” with taxable, tax-deferred and tax-free investments and savings.
If you’re like many savers, your tax-deferred bucket has been filling up slowly but surely over the years, as you’ve contributed regularly to a 401(k), 403(b) or some other workplace plan. And that’s great — except, depending on your future income, you could face weighty tax bills in the future, when you start withdrawals. Meanwhile, your tax-free bucket — which holds Roth accounts, most municipal bonds and properly structured cash-value life insurance — is likely lacking.
By converting some of the money in your tax-deferred bucket to your tax-free bucket, you can even things up. Yes, you’ll pay taxes now on the money you move, but with today’s lower tax rates, the bite might not be nearly as bad as it could be later. And in exchange, your Roth will give you tax-free growth and withdrawals going forward.
Final Thoughts
Your advisers may have preached before about eventually diversifying across all three tax buckets, but with these recent tax reforms, the concept takes on a bit of urgency. There are no limits on how much money you can move to a Roth IRA each year, but with careful planning you can avoid bumping yourself into the next tax bracket as you convert those savings. (Retirees also will want to be mindful about what extra withdrawals could do to the cost of Medicare.)
As a member of Ed Slott’s Master Elite IRA Advisor Group, I’m always trying to help people create tax-efficient strategies with their retirement income savings. Looking at a Roth conversion now is just one more way to do that. Take some time, do the math and see if it fits with your plan.
Kim Franke-Folstad contributed to this article.
Securities offered through Kalos Capital Inc. and Investment Advisory Services offered through Kalos Management Inc. Retirement Income Strategies is not an affiliate or subsidiary of Kalos Capita, Inc. or Kalos Management Inc.
Individuals should consult with a qualified professional for guidance before making any purchasing decisions.
- Do you think, between now and your death, tax rates will go higher?
- Do you expect the value of your retirement accounts to increase?
- If you had the opportunity to pay taxes on your retirement savings at a lower rate right now, would you grab it?
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Get Kiplinger Today newsletter — free
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.

Kristian L. Finfrock is the founder of and a financial adviser at Retirement Income Strategies. He is an Investment Adviser Representative of Kalos Capital and a licensed insurance professional. He resides in Evansville, Wisconsin, with his two daughters.
-
Baby Boomers vs Gen X: Who Spends More?
Baby Boomers and Gen X are guilty of spending a lot of money. Here's a look at where their money goes.
-
Retire in Finland and Live the Nordic Dream
Here's how to retire in Finland as a US retiree. It's ideal for those who value natural beauty, low crime and good healthcare.
-
You're Close to Retirement and Cashed Out: How Do You Get Back In?
If you've been scared into an all-cash position, it's wise to consider reinvesting your money in the markets. Here's how a financial planner recommends you can get back in the saddle.
-
What the HECM? Combine It With a QLAC and See What Happens
Combining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.
-
My Professional Advice: When It Comes to Money, You Do You
This is how embracing the 'letting others be' and 'learning to surrender' mindsets can improve your relationship with money.
-
Direct Indexing Expert Explains How It Can Be a Smarter Way to Invest
Direct indexing provides a more efficient approach to investing that can boost after-tax returns, but is it right for you?
-
Smiley Faces in Serious Places: Emoji Use Pops Up in Legal Battles Over Inheritances
Estate planning attorney notes how emojis are crossing over from casual conversation to litigation. What was once dismissed as 'just an emoji' is now carefully scrutinized.
-
When Downsizing, Does a Continuing Care Retirement Community Make Sense?
The idea that you'll never have to move again may sound tempting, but how about the costs? A financial planner explores the pros and cons of this style of retirement living.
-
An Expert's Guide to the Estate Planning Documents Everyone Needs
Estate planning is more than just writing a will. These are the documents you'll need in order to protect your family if you're seriously injured or worse.
-
Three Financial Planning Tips for the LGBTQ+ Community From an LGBTQ+ Financial Adviser
In light of social and political uncertainties, it's crucial that LGBTQ+ individuals review their estate plans, manage cash flow and savings and plan ahead if they want to expand their family.