When and Why You Might Consider a Strategic Roth Conversion
For two of my clients, the time was right for executing a Roth IRA conversion. Here’s why, and how they made the strategy work for them.


Over the past year, have you asked yourself, “How are we ever going to pay for the national debt that has been accumulated under the stewardship of both parties?” I know some of you were asking that question even before the pandemic. The federal government has been running annual deficits since 2002, with the additional red ink in 2020 tallying the total up to more than $3 trillion.
So, where do we go from here? The federal government’s remedies include higher taxes, lower expenses, or both. Those people on the right side of the political spectrum may say no higher taxes but cut spending, and those on the left will switch that around. So, if our elected representatives compromise, we are likely to have a mix of both.
Why a Roth? Because Taxes Are Low Until 2026
With higher taxes potentially coming down the road, it could be worth considering a strategic Roth conversion over the next few years. I will also remind you that the tax reform passed by Congress in 2017 reduced marginal tax brackets, but included a sunset clause that would revert brackets to 2017 levels in 2026 in the absence of action by Congress. If that happens, people now in the 12% bracket will revert back to the 15% bracket, and those in the 22% to the 25%, and so forth. Relative to history, we are in a low tax environment today. With the aforementioned deficits, a reversion to tax averages MIGHT be in the cards.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free 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.
So, consider a Roth IRA. The contributions/conversions into a Roth go in after tax, and grow tax-free forever. If an investor structures a strategic Roth conversion plan, they move (convert) dollars from a pretax plan (i.e., traditional IRA, pretax 401(k), etc.). This conversion triggers a taxable event. If you convert $50,000 from a traditional IRA to a Roth, you add $50,000 of income to your tax return that year. Many people understandably recoil at this because of the tax bill. It is undoubtedly short-term tax burden, but that must be weighed against the long-term tax gain of having the Roth dollars grow tax-free.
How My Client Pulled Off His Roth Conversion Coup
Case and point, some years back, a client of mine retired at age 64. He was concerned by all of his pretax investments, for which he would need to begin taking distributions from to satisfy IRA required minimum distributions (RMDs) at age 70 (since changed to age 72). He knew that with RMDs, he would likely be in a higher tax bracket for the rest of his life.
So, he carefully planned how much “room” he had in his current tax bracket — before bumping up into the next higher bracket — and “filled” it with a Roth conversion. He converted $50,000 yearly for four years and recognized the need to pay that tax bill with savings as opposed to having taxes withheld from the converted amount. He faced a substantial tax bill but now has a substantial tax-free Roth account that has absolutely no RMDs. And since his pretax portfolio is $200,000 less due to the conversions, his future RMDs will also be less.
Clearly, the foundation for this concept rests with a projection of your future retirement income and a guess at where taxes are headed. If you are facing a higher tax bracket years down the road due to RMDs, a strategic Roth conversion may make sense. If you don’t foresee your income going UP in retirement, but you believe taxes are going up for individuals, then the Roth conversion concept might be compelling. Conversely, this may be less compelling for those who expect to be in a lower tax bracket in the future or if they expect taxes to decrease in the future.
Another Client Capitalized on a Market Downturn
Another timely example took place in March 2020. A client of mine recognized that his traditional IRA was severely depressed as the pandemic took hold. He wisely converted a chunk of that IRA to his Roth. This was because stocks were depressed, and he converted more shares for the same dollar amount he desired to convert. When the market recovered, those shares he converted to the Roth rose along with the market.
A few key things to remember for converted dollars to a Roth: Generally, the dollars converted to a Roth must stay in the Roth for five years to avoid penalties and taxes. In addition, if you do conversions at or beyond age 72, the RMD must come out before the conversion, nor are RMDs eligible for Roth conversions.
This may all seem disturbingly complex, which it certainly is. Think through all concepts, and consider seeking advice from a professional to corroborate your plan.
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.

Jamie Letcher is a Financial Adviser with LPL Financial, located at Summit Credit Union in Madison, Wis. Summit Credit Union is a $5 billion CU serving 176,000 members. Letcher helps members work toward achieving their financial goals and through a process that begins with a “get-to-know-you” meeting and ends with a collaborative plan, complete with action steps. He is a member of FINRA/SIPC, a registered broker-dealer and investment adviser.
-
Market Fees Could Be Costing You — Here’s How to Avoid Them
Some money market accounts charge more than they earn. Here's how to spot costly fees and choose smarter savings options.
-
The Role of a Mortgage Underwriter in Buying a Home
From fast-track approvals to manual reviews, here’s what to expect (and how to avoid delays) in the underwriting process.
-
More Than Money: The Hidden Toll of Financial Abuse of Older Adults
Financial abuse from schemes involving tech support, government impostors, false sweepstakes, grandchild hoaxes and online shopping issues can cause thousands of dollars in losses.
-
I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your Dollars
The world often feels out of control, but here are three ways to use your money — through investments, charitable giving and political donations — to help create a more just and sustainable future.
-
The Unsung Hero of Aisle 5: A Tale of Forgotten Change and Compassion at the Supermarket
This supermarket manager went above and beyond to help when a child forgot her change at the checkout counter. You might be surprised at some of the complications that supermarkets face when it comes to customers' forgotten change.
-
Train, Integrate, Retain: A Strategic Playbook for Adviser Onboardings
Build a thriving practice by training new advisers with clear goals, structured processes and consistent mentorship for strong team growth.
-
I'm a Financial Professional: Here Are Four Ways You Can Use Debt to Build Wealth
Using debt strategically, such as for homeownership, education and more, can lead to greater financial stability and growth.
-
Five Key Wake-Up Calls for Ambitious Business Owners, From a Biz Specialist
Your personal financial plan needs to include a formal exit strategy for your business, or you could be in trouble.
-
I'm a Retirement Psychologist: Here's Why Doing What You 'Ought' in Retirement Beats Doing Whatever You Want
True retirement freedom isn't about simply doing whatever you want, but about finding purpose and direction through commitments that align with your deepest values and allow you to contribute meaningfully.
-
Tactical Roth Conversions: Why 2025-2028 Is a Critical Window for Retirees
The One Big Beautiful Bill (OBBB) extended today's low tax brackets, but they may not last. Here's how smart planning now can prevent costly tax surprises later.