Karey Hensley Rebello, CPA, CFP®
Insurance Sales & Tax PlanningKarey is a CPA and CFP® professional who focuses on tax planning, which is at the heart of every conversion decision.
Read full bio →Roth Conversions
Find out if a Roth conversion could help you keep more
See how converting part of a traditional IRA or 401(k) to a Roth might affect your taxes now and later, before you decide.
Is this you?
If any of these sound familiar, this page is for you.
- Most of your savings sit in a traditional IRA or 401(k), and every dollar out will be taxed.
- You've retired, or soon will, and have a few lower-income years before Social Security and RMDs.
- You worry that required minimum distributions will push you into a higher bracket later.
- You'd like to leave money to your children with less tax attached.
- You've heard about Roth conversions but don't know how much, or whether, to convert.
What we look at
What a roth conversions review covers
Your tax brackets now and later
How your current bracket compares with where RMDs, Social Security and other income may put you in future years.
Gap years
Lower-income years between retirement and Social Security or RMDs, when converting may cost less in tax.
How much to convert
Whether converting smaller amounts over several years may fit better than converting all at once.
Paying the tax
Where the money to pay the conversion tax would come from, and what that means for the rest of your plan.
Medicare premiums
How a conversion raises your income for the year and may affect IRMAA surcharges two years later.
Your heirs
How Roth dollars may pass to beneficiaries compared with traditional IRA dollars.
The basics
What a Roth conversion is
A Roth conversion moves money from a traditional IRA or pre-tax 401(k) into a Roth IRA. The amount you convert is generally added to your taxable income for that year.
In exchange, qualified withdrawals from the Roth later may be tax-free, and Roth IRAs have no required minimum distributions for the original owner. You're choosing to pay tax now, at today's rates, rather than later at rates no one can know for sure.
Timing
When a conversion can make sense, and when it may not
A conversion is a trade: tax now for potential tax savings later. Whether it's worth it depends on your brackets, your timeline and how you'd pay the tax.
It may make sense when
- You're in lower-income years before Social Security or RMDs begin
- You expect to be in a similar or higher bracket later
- You want to reduce future RMDs
- You'd like to leave Roth dollars to heirs
- You can pay the tax from money outside the IRA
It may not make sense when
- You expect a much lower bracket later in retirement
- You'd need to use IRA money to pay the tax
- The extra income would raise Medicare premiums or tax more of your Social Security
- You may need the converted money within five years
- You plan to leave the account to charity
The fine print
The Roth 5-year rules
There are two separate 5-year clocks. The first applies to earnings: to withdraw earnings tax-free, your first Roth IRA must have been open for at least five years and you generally must be 59½ or older.
The second applies to each conversion: if you're under 59½, converted amounts withdrawn within five years of that conversion may face a 10% penalty. Each conversion starts its own clock. Exceptions exist, so check with your tax professional before you withdraw.
Know the trade-offs
IRMAA and tax-bracket considerations
Converted dollars count as income in the year you convert. That can push you into a higher federal bracket and, because Medicare uses your income from two years earlier, may raise your Part B and Part D premiums through IRMAA.
Many people convert in planned amounts over several years to stay within a chosen bracket or below an IRMAA threshold. Bracket and IRMAA thresholds change every year, so a plan should be checked against the current year's figures.
The tool
Try the Roth Conversion Navigator
Answer a few questions to see a hypothetical, educational look at how a conversion might affect your taxes. Then book a call to review the results with our team.
- About 3 minutes, no account needed.
- Educational and hypothetical results, then review them with the team.
Roth Conversion Navigator
Answer a few questions about your accounts, income and timeline to see whether converting some savings over several years could be worth a closer look.
Start the Roth Conversion Navigator ↗Opens on our Retirement Ready Suite partner site. Results are educational and hypothetical; consult a tax professional.
Who you’ll talk to
The licensed insurance agents for roth conversions
Art Athanas, CFO, COO
Managing PartnerArt focuses on tax-efficient retirement planning and on helping clients reduce, and where possible eliminate, their tax burden.
Read full bio →Henrique Thormann
Licensed Insurance AgentHenrique works with clients on tax-efficient retirement planning and building a reliable retirement income stream.
Read full bio →John Petrucco
Licensed Insurance AgentJohn has 30 years in financial services and helps clients weigh complex decisions like conversions in plain terms, against their own retirement goals.
Read full bio →
As heard on Let’s Talk Safe Money®
Hear Len and Art explain it on the show.
Len and Art host the show on 610 WIOD. Watch more episodes in LSF University.
Watch full episodesQuestions
Common questions about roth conversions
What is a Roth conversion?
A Roth conversion moves money from a traditional IRA or pre-tax retirement account into a Roth IRA. You generally pay income tax on the amount converted in the year you convert. Qualified withdrawals from the Roth later may be tax-free, and the original owner has no required minimum distributions.
How much tax will I owe if I convert?
The converted amount is generally added to your taxable income for the year, so the tax depends on your bracket and your other income. A large conversion can push part of it into a higher bracket. The Navigator gives a hypothetical estimate, and your tax professional can confirm the actual figure.
What is the Roth 5-year rule?
There are two. To withdraw earnings tax-free, your first Roth IRA must have been open at least five years and you generally must be 59½ or older. Separately, each conversion has its own five-year clock: if you're under 59½, withdrawing converted amounts within five years may trigger a 10% penalty, unless an exception applies.
Can a Roth conversion affect my Medicare premiums (IRMAA)?
Yes, it can. A conversion raises your income for that year, and Medicare uses your income from two years earlier to set IRMAA surcharges on Part B and Part D. Spreading conversions over several years may help you manage this, so check the current year's thresholds when planning.
Should I convert all at once or over several years?
Many people convert in smaller amounts over several years to stay within a chosen tax bracket and manage IRMAA. Converting all at once may make sense in some cases, such as an unusually low-income year. The right pace depends on your income, timeline and how you'd pay the tax.
Can I undo a Roth conversion?
No. Recharacterization of Roth conversions ended for conversions made after 2017, so a conversion can't be reversed. That's why it helps to run the numbers before you convert, not after.
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Serving Broward, Palm Beach, Miami-Dade & North Carolina
Call 954.999.0355Trafalgar Plaza, 5310 NW 33rd Ave., Suite 114, Fort Lauderdale, FL 33309 · In person, or by video from anywhere in the country
Connect with a licensed insurance agent
Try the Roth Conversion Navigator
15 minutes, no obligation. Pick a time and we’ll call you, or meet us at Trafalgar Plaza or by video.
- Topic set to Roth conversions, change it if you like.
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Important information. Roth Conversion Navigator results are hypothetical and for educational purposes only; they are not a recommendation and do not reflect actual results. Tax rules, brackets and IRMAA thresholds change and depend on your situation. This page is not tax or legal advice for your situation; consult your tax professional before converting.