Is there a best time to convert?
Some people look at years when their income is lower, such as early retirement before Social Security and RMDs begin. It depends on your situation.
Taxes and required withdrawals
How Can a Roth Conversion Affect Retirement Income?
A Roth conversion moves money from a tax-deferred account into a Roth IRA and adds that amount to your taxable income for the year. In exchange, qualified Roth withdrawals later can be tax-free, and Roth IRAs have no required minimum distributions for the original owner. That can change how much taxable income you have in retirement, but the upfront tax cost is real and personal.
Written and reviewed by Dan Hopwood, Retirement Income Specialist · Retirement Income Knowledge Center · Last reviewed
How conversions change future income
- Smaller tax-deferred balance, which can mean smaller future RMDs.
- A Roth balance you can draw from without adding taxable income, if withdrawals are qualified.
- More choices each year about which account to use for spending.
- For heirs, Roth money can often be received without income tax, though distribution rules apply.
The costs to weigh
- Income tax on the converted amount, paid in the conversion year.
- Higher income that year can raise Medicare premiums two years later.
- Extra income can make more of your Social Security taxable.
- A conversion cannot be undone once it is made.
A multi-year example
Illustrative conversions before RMDs begin
- Retire at 65 with lower income
- Low-income years before RMDs
- Convert $25,000 per year, ages 65–72
- $200,000 moved to Roth
- Assumed 12%–22% tax on conversions
- Tax paid each year
- Result at 73
- Smaller tax-deferred balance for RMDs
Illustration only. Whether this makes sense depends on your brackets, other income, state tax and future law. Not tax advice.
Rules to know
Each conversion has its own five-year period for certain penalty rules if you are under 59½. RMDs for the year must generally be taken before converting. These rules are detailed, so please review any conversion with a qualified tax professional.
Tax-deferred vs. Roth money in retirement
| Tax-deferred (traditional IRA/401(k)) | Roth IRA | |
|---|---|---|
| Taxed when | Withdrawn | Converted or contributed |
| Qualified withdrawals | Taxable income | Tax-free |
| RMDs for the owner | Yes | No |
General rules; not tax advice. Talk to a tax professional about your situation.
Estimate the tax cost of a conversion
Enter a conversion amount and your tax rates. The calculator shows the estimated tax today, so you can discuss it with a tax professional.
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Common questions
Can I convert my RMD?
No. Required minimum distributions cannot be converted to a Roth IRA. The RMD must be taken first.
Is this tax advice?
No. RetirementLeverage is educational. Talk with a qualified tax professional before converting.
Do Roth conversions make sense after 65?
They can for some retirees, especially in lower-income years before RMDs begin, but conversions add taxable income that can affect Medicare premiums and taxes on Social Security. Whether they make sense depends on your current and expected tax situation. A tax professional can run the numbers.
Do Roth IRA withdrawals count as taxable income in retirement?
Qualified Roth IRA withdrawals are generally tax-free and do not count as taxable income. Rules about the five-year period and age 59½ apply. The IRS explains when a withdrawal is qualified.
Why do some people convert to Roth before RMDs start?
The years between retiring and RMD age can have lower taxable income, which some people use to convert at lower rates. That can shrink future RMDs. This is general education, not tax advice.
Can a Roth conversion raise my Medicare premiums?
Yes. A conversion adds to your income, which can trigger IRMAA surcharges two years later. Many people factor this in when deciding how much to convert.
Do I have to pay the conversion tax from the IRA itself?
No. Paying the tax from money outside the IRA keeps more in the Roth. If the tax is withheld from the conversion and you are under 59½, that withheld amount may be subject to an additional tax. A tax professional can explain your options.
Can a Roth IRA help a surviving spouse?
It can. A survivor who files as single faces narrower tax brackets, and qualified Roth withdrawals are generally tax-free. Roth IRAs also have no RMDs for the original owner. This is general education, not tax advice.
Authoritative sources
This page is educational and general in nature. RetirementLeverage™ and Retirement Planning Store, Inc. do not provide individualized investment, securities, tax, or legal advice; please consult a qualified tax professional or attorney about your own situation. Insurance products and services may not be available in every state, and any guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.