Myths and Truths About Roth Conversions

Roth conversions get talked about a lot.

Sometimes they’re presented as a no-brainer. Other times, people are told they’re too risky or too expensive.

The truth is simpler: a Roth conversion is just a planning tool. Whether it makes sense depends entirely on your situation.

Let’s walk through a few common misconceptions.

Myth #1: “Roth conversions are always a good idea.”

They’re not.

A Roth conversion means moving money from a pre-tax account (like a Traditional IRA or 401(k)) into a Roth IRA. You pay income tax on the amount converted today, and future growth becomes tax-free.

That can be powerful, but only if the math works.

It generally makes sense when:

• Your current tax rate is lower than what you expect in the future

• You have cash outside the IRA to pay the tax

• The conversion doesn’t push you into a bracket you didn’t intend to enter

• It fits within your overall retirement income strategy

And sometimes, it makes sense because of what happens after you’re gone.

Under current rules, most non-spouse beneficiaries must fully distribute inherited IRAs within 10 years. If those dollars are pre-tax, your children could be forced to take large taxable distributions during their peak earning years. A Roth IRA, on the other hand, still follows the 10-year rule, but distributions are generally tax-free.

In some cases, converting during your lifetime at a controlled rate can reduce the future tax burden on your heirs.

This isn’t something you do automatically. It’s something you model.

Myth #2: “If I convert, I’ll blow up my tax bracket.”

Not necessarily.

Our tax system is progressive. You only pay the higher rate on the dollars that fall into that bracket, not on your entire income.

Most thoughtful conversion strategies are about filling up lower brackets intentionally. For example, converting just enough each year to top off the 12% or 22% bracket.

Conversions typically aren’t about going all-in in one year. It’s usually a multi-year plan.

Myth #3: “I should convert before taxes go up in the future.”

Instead of trying to predict Washington, it’s usually more productive to focus on what we can actually model:

• Your projected income over time

• When Required Minimum Distributions (RMDs) begin

• The impact on Medicare premiums

• How your Social Security benefits will be taxed

• Your estate and legacy goals

Roth conversion decisions aren’t about guessing future tax policy. They’re about understanding your lifetime tax picture and, in many cases, how today’s decisions affect the next generation.

Myth #4: “Roth conversions are just for younger people.”

Actually, some of the best opportunities happen later.

There’s often a window between retirement and age 73 (when RMDs start for most people) where income temporarily drops. That can be an ideal time to convert.

We also sometimes look at conversions during market pullbacks. When account values are lower, you’re paying tax on a smaller balance.

For families thinking about legacy planning, reducing the size of future RMDs or leaving behind tax-free dollars can create more flexibility for heirs.

Age isn’t the determining factor. Tax structure is.

When Roth Conversions Tend to Make Sense

In our experience, they’re worth serious consideration when:

• You have a large pre-tax balance that could create sizable RMDs later

• You retire early and have lower-income years

• You want to reduce future tax uncertainty

• You’re thinking about leaving assets to heirs in a more tax-efficient way

Just because your situation might apply to some of the points above doesn’t necessarily mean a Roth conversion makes sense for you. It depends on the numbers.

The Bigger Question

A Roth conversion isn’t about avoiding taxes. It’s about deciding when to pay them.

There’s no universal right answer. That’s why we run projections.

The biggest mistake I see isn’t converting too much or too little. It’s never looking at it at all.

If you’ve built up meaningful pre-tax retirement savings, especially if legacy planning is important to you, it’s worth asking whether a Roth conversion strategy belongs in your plan.

As always, this should be coordinated with your CPA or tax advisor. The goal isn’t to chase a strategy; it’s to make sure your long-term tax picture is intentional.

Interested in discussing if a Roth conversion strategy is right for you? Reach out and let’s discuss.

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