Roth IRA Conversion: Complete Guide
A Roth conversion moves money from a Traditional IRA into a Roth IRA. You pay income tax on the amount converted now, and all future growth and withdrawals are tax-free. Converting at the right time can save tens of thousands in taxes over a lifetime. Here is how to decide when and how much to convert.
Updated 28 March 2026
What Is a Roth Conversion?
A Roth conversion is the process of transferring funds from a pre-tax retirement account (Traditional IRA, SEP IRA, SIMPLE IRA, or old 401(k)) to a Roth IRA. The converted amount is treated as taxable income in the year of the conversion. After conversion, the money grows tax-free and can be withdrawn tax-free in retirement.
What you gain
- + Future withdrawals are completely tax-free
- + No required minimum distributions (RMDs)
- + Tax-free inheritance for heirs
- + More flexibility in managing taxable income in retirement
What you pay
- - Ordinary income tax on the converted amount in the conversion year
- - Possible bump into a higher tax bracket if converting a large amount
- - May affect Medicare premiums 2 years later (IRMAA)
When Does a Conversion Make Sense?
A Roth conversion makes financial sense when you pay tax on the converted amount at a lower rate than you would have paid on withdrawals in retirement. The ideal windows for conversion are:
Early retirement gap years
If you retire before Social Security starts (typically age 62 to 70), you may have several years of unusually low income. This is the classic conversion window. Convert enough to fill up your lower tax brackets each year. If you are in the 12% bracket with no other income, you can convert up to ~$48,000 single ($97,000 married) per year at very low tax rates.
Low-income years
Career change, sabbatical, job loss, or any year with significantly lower than usual income creates a conversion opportunity. If your income drops you into a lower bracket than your expected retirement income, converting to fill that bracket makes long-term sense.
Before Social Security and RMDs begin
Once Social Security starts, up to 85% of benefits become taxable income. Once RMDs begin at 73, you are forced to take taxable distributions from Traditional IRAs. Converting before these events reduces the size of your Traditional IRA and the magnitude of future forced taxable income.
After a market decline
If your IRA balance has fallen 20% due to a market downturn, converting now means paying tax on a lower balance. When the market recovers, all the gain is sheltered in the Roth. Conversions after market downturns are tax-efficient because the same amount buys more recovery potential.
How to Calculate the Tax on a Conversion
The converted amount is added to your other taxable income for the year. This is straightforward but there are important details.
Example: Partial conversion in a low-income year
By converting $23,475 from a Traditional IRA, you use up the rest of your 12% bracket without touching the 22% rate. Tax on the conversion: $23,475 x 12% = $2,817.
If that $23,475 had grown to $120,000 by retirement and been withdrawn in a 28% bracket, the tax would have been $33,600. Converting now saves over $30,000 in tax.
This 'bracket filling' approach to partial conversions is one of the most effective tax planning strategies available. Rather than converting everything at once (which pushes income into the highest brackets), you convert strategically each year to keep income within lower brackets.
The Backdoor Roth IRA
High earners above the Roth income limits ($165,000 single, $246,000 married in 2025) cannot contribute directly to a Roth IRA. The backdoor Roth is a legal workaround.
Contribute $7,000 (or $8,000 if 50+) to a Traditional IRA. Since you are above the income limit for deductibility, this is a post-tax (non-deductible) contribution. No tax deduction is taken. File Form 8606 with your tax return to record the after-tax basis.
Shortly after the contribution (ideally the same day or within a few days), convert the Traditional IRA to a Roth IRA. Because the contribution was post-tax and there has been minimal time for earnings to accrue, the conversion is nearly tax-free. You pay tax only on any small amount of earnings since the contribution.
Report the non-deductible contribution and conversion on IRS Form 8606 with your tax return. This is important to establish that the contribution was post-tax and that the conversion is tax-free. Failure to file Form 8606 can result in paying double tax on the same money.
The Pro-Rata Rule: The Backdoor Roth Complication
The pro-rata rule is the biggest complication with backdoor Roth contributions. If you have pre-tax money in any Traditional IRA (from deductible contributions or rollovers), the IRS treats all your Traditional IRA money proportionally when you convert.
Pro-rata rule example
The backdoor Roth is much less effective when you have existing pre-tax IRA balances. You end up paying tax on 90% of the conversion even though you intended to contribute post-tax money.
Common Questions
Is there an income limit for Roth conversions?
No. Anyone can convert a Traditional IRA to a Roth IRA regardless of income. The income limits that apply to Roth contributions do not apply to conversions. This is what makes the backdoor Roth possible for high earners.
Can I undo a Roth conversion?
No. The Tax Cuts and Jobs Act of 2017 eliminated the ability to recharacterise (undo) a Roth conversion. Prior to 2018, you could reverse a conversion if the account value had declined. This option no longer exists. Once converted, the tax obligation is set.
Should I convert to Roth before or after age 73?
Ideally before. Once you reach 73 and RMDs begin, you are forced to take taxable distributions each year. Converting before 73 reduces your Traditional IRA balance and therefore the size of future RMDs. Converting after 73 is still possible but you cannot use required minimum distributions as conversion amounts. The RMD must be taken first; only amounts above the RMD can be converted.
This page discusses Roth conversions and backdoor Roth strategies for educational purposes. Tax law is complex and subject to change. The pro-rata rule, IRMAA implications, state tax treatment, and other factors can significantly affect whether a conversion is beneficial in your specific situation. Consult a qualified tax professional or CPA before executing a Roth conversion strategy.