Roth Conversion Decisions – Should I Consider Doing A Roth Conversion?

2026 · SHOULD I CONSIDER DOING A ROTH CONVERSION?
Will you need distributions from your retirement accounts to fund your retirement income plan?Will you need distributions from the Roth IRA within five years of converting?Do you expect to be subject to the same or lower income tax rates during most of your retirement either due to income levels or future tax reform?Are you currently, or will you in the near future become, a participant in programs where your eligibility/treatment is income-based (such as Medicare/IRMAA, financial aid, or ACA subsidies)?Are the beneficiaries of your retirement account(s) qualified charitable organizations?Do you expect your beneficiaries to be subject to high income tax rates in the future?Do you have cash outside of your retirement accounts to pay the income taxes due upon conversion?Be mindful of the 5-year rule. Reference “Will My Roth IRA Conversion Be Penalty-Free?” flowchart.Increasing your income with Roth conversions could impact the amount you pay/receive through income-based programs.Low asset valuations (due to a market correction, etc.) or expiring carryforwards and credits could provide additional incentives to do a Roth conversion.After your death, income tax-free distributions will be advantageous to your beneficiaries.Sorry, a Roth conversion offers little advantage to you, and none to your beneficiaries. Consider making QCDs during your lifetime and transferring your traditional retirement account(s) at your death.Consider doing Roth conversions. Be mindful that taxes withheld from the conversion itself are subject to a 10% penalty (unless an exception applies), and will decrease the net amount of your conversion. Inheriting Roth assets will be particularly valuable to “Non-Eligible Designated Beneficiaries,” who are subject to the 10-Year Rule, which accelerates distributions (and taxation if the assets remained in a traditional IRA).Sorry, converting and paying tax today at a higher rate may not be advantageous. Consider deferring your tax liability until distributions are needed and/or required. YesNoYesNoYesNoReference “Can I Do A Qualified Charitable Distribution From My IRA?” flowchart.Sorry, if your beneficiaries are in low tax brackets, the cost of conversion may not be justified.Consider doing Roth conversions. The Roth IRA will not be subject to RMDs, and it can allow the assets to grow tax-free.NoYesNoYesNoYesYesNoSTART HERE
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 Dejan Ilijevski, MBA, MS

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