Planning for retirement involves making important decisions about how and when your retirement savings will be taxed. One strategy worth considering is a Roth conversion. This type of wealth management tool allows you to move money from a traditional IRA or other eligible pre-tax retirement account into a Roth IRA. You generally pay income tax on the taxable amount converted in the year of the conversion. In exchange, the money can continue growing in the Roth IRA, and qualified withdrawals in retirement are tax-free.
Roth conversions can be particularly useful if you expect your tax rate to be higher in the future or want more flexibility when managing taxable income in retirement. However, the timing and amount of a conversion matter. Here are four Roth conversion strategies that may help improve tax efficiency and provide greater flexibility in retirement.
1. Choose the Right Time for a Roth Conversion
Timing is one of the most important factors when considering a Roth conversion. Because the taxable portion of a conversion is generally treated as ordinary income, converting a large amount in a single year could push some of your income into a higher federal tax bracket.
Consider converting traditional retirement savings when your taxable income is lower than usual. Examples may include taking a career break, experiencing a temporary reduction in income, or retiring before required minimum distributions (RMDs) begin.
For 2026, federal income tax rates continue to range from 10% to 37%. Understanding where your taxable income falls within those brackets can help determine how much you may want to convert in a given year. Working with a wealth manager and tax professional can help you determine whether a lower-income year presents an opportunity to convert some of your retirement savings at a potentially more favorable tax rate.
2. Consider Phased Roth Conversions
Converting your entire traditional retirement savings at once may create a significant tax bill. You may want to spread Roth conversions across multiple tax years. With phased conversions, a portion of your traditional retirement savings converts each year rather than moving the entire balance at once. This approach can help you manage taxable income and potentially avoid unnecessarily pushing more income into a higher tax bracket.
Unlike most traditional IRAs, Roth IRAs, don’t require RMDs for the original account owner. Reducing traditional IRA balances before RMDs begin may provide greater flexibility when managing taxable retirement income later.
3. Be Strategic Converting Assets
When performing a Roth conversion, you don’t necessarily need to convert all of your retirement assets at the same time. Consider the investments within your traditional retirement accounts and their long-term growth potential. For example, assets that have temporarily declined in value may present a conversion opportunity because converting at a lower account value could result in less taxable income than converting the same investment after it has recovered.
Once assets are held in a Roth IRA and qualified withdrawal requirements are met, future earnings may grow tax-free. Your overall asset allocation, risk tolerance, time horizon, retirement income needs, and long-term financial goals should remain part of the decision. Consulting with your wealth manager can help you evaluate which assets to convert and how a Roth conversion fits into your overall retirement savings strategy.
4. Understand Backdoor Roth Conversions
A backdoor Roth IRA is often considered by higher-income taxpayers who aren’t eligible for direct Roth IRA contributions. This strategy generally includes making non-deductible contributions to a traditional IRA, then converting that money to a Roth IRA. Unlike direct Roth IRA contributions, Roth conversions do not have an income eligibility limit.
However, the process can become more complicated if you already have pre-tax money in traditional, SEP, or SIMPLE IRAs. The IRS’s pro rata rules may cause part of the conversion to be taxable rather than allowing you to convert only the nondeductible contribution. For that reason, a backdoor Roth IRA should be carefully evaluated with a wealth manager or tax professional before moving forward.
How Does a Roth Conversion Affect My Retirement Savings?
A Roth conversion doesn’t automatically increase the amount you’ve saved for retirement. Instead, it changes the taxes. Traditional retirement accounts generally provide tax-deferred growth, with taxable withdrawals later. Roth IRAs are funded with after-tax dollars, and qualified withdrawals are generally tax-free.
That distinction can provide several potential benefits. Roth assets may give you another source of retirement income that doesn’t increase taxable income when qualified distributions are taken. Roth IRAs also do not require RMDs during the original owner’s lifetime, which can provide additional flexibility when determining where retirement income should come from each year.
The trade-off is you generally pay taxes on the amount you convert today. The key question is whether paying those taxes now makes sense compared with potentially paying taxes on withdrawals later.
Is a Roth Conversion Right for You?
Roth conversions can be a valuable retirement planning tool, but they aren’t the best choice for everyone. Before converting retirement savings, consider your current and expected future tax brackets, retirement timeline, other sources of taxable income, RMDs, Medicare considerations, investment strategy, and other financial goals and strategies.
It’s also important to remember that Roth conversions generally cannot be undone. Under current tax law, a completed Roth conversion cannot be recharacterized back into a traditional IRA.
Maximize Your Retirement Savings With a Long-Term Strategy
Roth conversions can make your retirement savings more tax-efficient, providing additional flexibility for the future. Whether you’re considering a one-time conversion, phased conversions over several years, or a backdoor Roth strategy, the decision should be based on your broader financial picture rather than taxes alone.
Good Life Private Wealth can help you evaluate Roth conversion opportunities as part of a comprehensive retirement planning strategy. With careful planning and strategy, you can determine how traditional and Roth accounts should work together to support your income needs, tax strategy, and long-term retirement goals.