Is a Roth Conversion Just Not That Into You? Here's When It's a Perfect Match (and When It Isn't)
Sometimes a Roth conversion isn't right for you — or at least not right now. I'm a financial adviser, and this is what you should consider before getting involved.
Not long ago, a client came to me with what sounded like a simple question:
"Should I do a Roth conversion?"
It's a question I hear often — and it makes sense. Roth conversions are frequently recommended as a smart tax strategy for retirement.
But after walking through this client's situation together, it became clear that a Roth conversion might not have been the right move at that time.
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That's an important reminder I share with many of my clients: A strategy that works well for someone else isn't automatically the right fit for you.
What exactly Is a Roth conversion?
A Roth conversion simply means moving money from a traditional IRA or 401(k) (where contributions were made pre-tax) into a Roth IRA (where withdrawals can be tax-free later).
When you convert funds, you pay income taxes on the amount converted now in exchange for potential tax-free growth and withdrawals in the future.
For many people, this can be a powerful long-term planning strategy — but timing and circumstances matter.
Why a Roth conversion didn't make sense in this case
In this client's situation, their primary source of retirement income was going to be withdrawals from their IRA, and retirement was only a few years away.
When you convert funds into a Roth account, a five-year rule applies. Generally speaking, you need to wait five years before withdrawing converted funds to avoid additional taxes.
Since this client expected to rely on those assets sooner than that, the primary benefit of converting simply wasn't going to apply.
In other words, the strategy sounded appealing on the surface, but it didn't support their real-world retirement timeline.
Why timing matters
For many investors, Roth conversions can be extremely valuable. Yes, you pay taxes at the time of conversion, but once the money is inside a Roth account, it can grow tax-free and be withdrawn tax-free in retirement.
Roth IRAs are also not subject to required minimum distributions, which can make them a powerful planning tool for both retirement income flexibility and legacy planning.
Still, there are several situations where it makes sense to pause before converting.
1. You're currently in a higher tax bracket.
Every dollar converted is treated as ordinary income in the year of the conversion. If your income is already near the top of your tax bracket, converting could push part of that income into a higher bracket.
Sometimes, waiting for a lower-income year can make the strategy far more efficient.
2. You would need to use retirement funds to pay the conversion taxes.
Ideally, taxes on a conversion should be paid from savings outside the retirement account. Using retirement assets to cover the tax bill reduces the amount working for you long term and weakens the overall benefit of the strategy.
3. Your income may drop in the near future.
If you expect retirement, reduced work hours or another life transition that lowers income, it may make sense to delay conversion until you're in a lower bracket.
Timing can be just as important as the decision itself.
4. The conversion could increase your Medicare premiums.
Medicare Part B and Part D premiums are based on taxable income. Because conversions increase income in the year they occur, they can sometimes trigger higher premiums.
This doesn't automatically rule out a conversion — but it's something worth planning around carefully.
Sometimes the smartest strategy is a gradual approach
In many cases, spreading conversions over several years can reduce the tax impact and create a more efficient outcome overall.
Rather than asking "Should I convert?", the better question is often: "How much should I convert — and when?"
That's where personalized planning really makes a difference.
Roth conversions are powerful — but personal
It's easy to hear about a friend, neighbor or coworker who completed a Roth conversion and assume it's something you should do, too. But retirement planning works best when strategies are tailored to your specific income picture, timeline and goals.
Roth conversions can absolutely play an important role in a well-designed retirement plan. The key is making sure they're implemented thoughtfully and at the right time.
With the right guidance and a clear understanding of the trade-offs, they can become a valuable tool — not just a popular recommendation.
Ronnie Blair contributed to this article.
Advisory services offered through Woloshin Investment Management, LLC, an Investment Adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training.
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.
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