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Should You Convert Your IRA to a Roth?
Published Date : October 30, 2025
If you’ve been saving for retirement in a traditional IRA, you may have heard about the option to convert it into a Roth IRA. It’s a move that can offer significant long-term tax advantages—but it’s not the right choice for everyone. Before making the switch, it’s important to understand the benefits and drawbacks of a Roth conversion.
A Roth conversion involves moving money from a traditional IRA, which is typically funded with pre-tax dollars, into a Roth IRA, which is funded with after-tax dollars. When you convert, you pay taxes on the amount you transfer in the year of the conversion. After that, your money grows tax-free, and qualified withdrawals in retirement are also tax-free.
Pros of a Roth Conversion
Tax-Free Growth and Withdrawals – Once your money is in a Roth IRA, it grows tax-free. When you retire, you can withdraw funds without paying a dime in taxes—as long as you follow the rules (e.g., being 59½ or older and holding the Roth for at least five years).
No Required Minimum Distributions (RMDs) – Traditional IRAs require you to start taking minimum distributions at age 73, whether you need the money or not. The withdrawn funds are typically taxed as income versus the more favorable long-term capital gains rate. Roth IRAs do not have RMDs during your lifetime, which gives you more control over your money and taxes in retirement.
Potential for Lower Taxes in the Long Term – If you expect to be in a higher tax bracket in retirement—or if tax rates in general increase—a Roth IRA may help reduce your lifetime tax burden. By paying taxes now, you could save more later. Also, if you know you are in a period where income will be significantly lower than in the future, between jobs for example, this may be an opportune time to convert.
Estate Planning Advantages – Roth IRAs can be a tax-efficient way to leave money to heirs, who can also benefit from tax-free withdrawals under certain rules. It’s important to note that non-spouse inherited Roths may still be subject to the 10-year rule.
Cons of a Roth Conversion
Immediate Tax Hit – The biggest downside is the upfront tax bill. If you convert $50,000 from a Traditional IRA and you’re in the 24% tax bracket, you’ll owe $12,000 in federal taxes that year—not including state taxes, which can be significant for CA residents. Paying the tax bill with non-retirement funds is ideal, but not always possible. And unless you have surplus cash available to pay Uncle Sam, you’ll need to consider the tax bill for raising the necessary cash in your taxable account.
Potential for Higher Tax Bracket – A large conversion could push you into a higher tax bracket for the year. This could also impact other areas, like eligibility for tax credits, Medicare premiums, or Social Security taxation.
Loss of Funds for Growth – If you pay the conversion tax out of the IRA itself, you reduce the amount of money that can grow tax-free. That can weaken the benefits of conversion over time. As stated earlier, you can pay the tax liability from a non-retirement account to avoid this reduction, but cash reserves must be available come tax time.
Five-Year Rule – Withdrawals from a Roth IRA must meet a five-year holding requirement to be tax-free—even if you’re over 59½. If you withdraw too early, you may face taxes or penalties.
A Roth conversion can be a powerful tool for retirement planning—but it’s not a one-size-fits-all solution. The benefits depend heavily on your current tax bracket, your future income expectations, and how long you plan to leave the money invested. Talk with your Sand Hill Wealth Manager or tax professional to see if a Roth conversion aligns with your long-term goals.
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