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  • Writer's pictureMark Fonville, CFP®

Is a Roth Conversion in Retirement Right for You?

Updated: Nov 17, 2023

Is a Roth conversion in retirement right for you?

A Roth conversion in retirement can provide you with several benefits like lower taxes, reduced RMDs, and greater flexibility.

But is a Roth conversion in retirement the right strategy for you?

We walk you through some points to consider in this article and have an easy-to-follow guide you can use as well.

The Fundamental Difference Between Roth and Traditional Accounts (And Why It Matters So Much)

The key to understanding the benefits of a Roth conversion in retirement is knowing how each account type’s withdrawals are taxed.

Taxing Traditional IRA Accounts

In general, you can deduct contributions to a traditional or tax-deferred retirement account on the front end, assuming you meet certain income limitations. Keep in mind that you may be unable to make deductible contributions to a traditional individual retirement account (IRA) if you’re covered by a workplace retirement plan or if your gross income exceeds certain limits.

The IRS doesn't tax the growth of the money until you withdraw the funds after age 59 ½, at which point you'll pay income tax on the distribution.

If your entire retirement savings is in tax-deferred accounts, all of your income will be taxable.


Want a comprehensive guide on determining if a Roth Conversion is right for you? Download our Roth conversion workflow here.


Taxing Roth Accounts

Roth IRA contributions, unlike IRAs and 401ks, do not receive an up-front tax deduction.

However, you don’t owe any taxes on qualified distributions when you withdraw the funds in retirement. That includes withdrawals of any investment gains over the years. Tax-free withdrawals bring much more flexibility to your retirement income plan.

Tips On Where To Save

Deciding whether to invest in a traditional or Roth account depends on your tax bracket.

You’ll evaluate your tax rate now compared to what it likely will be in retirement. If you anticipate your tax rate will be higher in retirement, it’s often in your best interest to pay the taxes now so that you can withdraw funds tax-free in retirement. In other words, a Roth makes sense.

But what if you already have tax-deferred savings? Here’s where a Roth conversion comes in.

What’s a Roth IRA Conversion?

A Roth conversion allows you to convert money from a traditional account into a Roth account.

By initiating a conversion (or Roth rollover), you’ll owe income taxes on the amount you convert in the current year, but that money enjoys the benefit of tax-free growth and withdrawals in the future.

You can even take advantage of this backdoor Roth strategy if you are already retired, although there are some things to watch out for that we will talk about in a minute.

Be aware, though, that if you are subject to current required minimum distributions (RMDs), you still have to take your RMD for the year before a conversion. RMDs themselves cannot be converted.

So as you're planning for your retirement, how can you know if a Roth conversion is the right move for you?

How to Tell if a Roth Conversion In Retirement is Right For You

A Roth conversion can be the right move for many reasons. Any one or a combination of the following can mean a conversion is a good choice for you.

  • You presume taxes will be higher in the future. It’s a fact that our current tax brackets are historically low. Given the sizeable national debt (Close to $29 trillion in 2021!), many believe that those rates will go back up at some point. If that’s the case, then converting and paying tax now would save you money in the long run, even if your current tax bill is a little higher.

  • You will be in a higher tax bracket in retirement. If you can clearly see that with your current savings you’ll be pushed into a higher tax bracket in the future, converting may allow you to avoid that higher bracket. Yes, your taxes will go up now, but it may save you even more throughout retirement, a time where being tax conscious can have a significant impact on your lifestyle and legacy.

  • You had a low-income year and are in a lower tax bracket than typical. Maybe you were laid off or are a business owner, and things were slow. If your taxable income is lower than average, you could take advantage of that by converting some of your savings.

  • You are concerned about passing money to your heirs. The SECURE Act eliminated the “stretch provision” for inherited IRAs, meaning most non-spouse beneficiaries have to withdraw all the funds within ten years. Getting rid of this rule could mean more taxes for your heirs. But Roth IRAs are not subject to RMDs, so you can let that money grow and pass it on as part of your estate plan.

  • Tax diversification. Things change over time, and taxes are no different. Having savings that are treated differently for tax purposes provides you with the flexibility to adapt to changing circumstances and tax laws.

When A Roth Conversion Might Not Be The Right Move

Despite the potential benefits, a Roth conversion in retirement is not always the best option. A Roth conversion may not benefit you if:

  • You are in or near retirement and will need to draw a significant amount of income from your traditional account. Adding a conversion on top of that withdrawal could drive your taxes up even more than you’ll be able to reduce in the future. You may not have time to recoup the tax hit by the time you need to withdraw from the Roth accounts.

  • Your Social Security and Medicare are affected by your taxable income in retirement. Depending on your income, either none, half, or 85% of your Social Security benefits are taxable. A Roth conversion could push you over the line for hitting the next level. Your Medicare Part B premium also includes an adjustment based on your income (IRMMA). The amount could be up to several hundred dollars a month, so make sure to consider those tax implications.

  • If you plan to donate to charities with your traditional IRA assets, the Roth conversion is not the best way to approach this goal. There’s no reason to convert and pay taxes when a Qualified Charitable Distribution (QCD) would allow you to avoid taxes on the gift anyway.

Painting a clear picture of your tax liability is a critical component of your financial plan. At Covenant, we have in-house financial planners and tax professionals to help you create a comprehensive plan that meets your needs.

Contact us for a free, no-obligation consultation to see if we can help you with Roth conversions and dozens of powerful retirement strategies.



Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.

The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

Registration of an investment advisor does not imply a certain level of skill or training.


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