When planning for retirement, many individuals focus on investment returns, withdrawal strategies, and lifestyle budgeting. But there’s another important piece to consider: taxes. The role of Roth conversions in retirement planning has grown in recent years as retirees look for ways to create more tax flexibility in their income strategy. 

A Roth conversion involves transferring funds from a tax-deferred retirement account, such as a traditional IRA or 401(k), into a Roth IRA. While the converted amount is taxable in the year of conversion, future withdrawals from the Roth account can be tax-free if certain conditions are met. 

Understanding when and how Roth conversions might fit into your broader retirement strategy can support more flexible decision-making in the years ahead. 

The Basics of Roth Conversions 

A Roth conversion shifts funds from an account that will be taxed upon withdrawal into an account that can potentially offer tax-free income in retirement. Once the money is in a Roth IRA and the five-year holding period is met, qualified withdrawals—including earnings—can be made without additional tax. 

Key characteristics of Roth conversions include: 

• You pay income tax on the amount converted in the year it’s moved 

• There are no required minimum distributions (RMDs) from Roth IRAs 

• Future withdrawals may not increase your taxable income 

The decision to convert should consider your current tax bracket, future income projections, and your overall retirement plan. 

Why Timing Matters 

One of the most strategic aspects of Roth conversions is timing. Many individuals consider conversions during retirement but before RMDs begin at age 73 (as of 2025). During this window, taxable income may be lower than during working years, potentially resulting in a lower tax rate on the conversion. 

For example, if you’ve just retired but haven’t started Social Security or large account withdrawals yet, your income may temporarily drop—creating a tax-efficient opportunity to convert a portion of your tax-deferred savings to a Roth. 

Additionally, converting over several years in smaller increments may help manage your marginal tax rate and avoid pushing you into a higher bracket in any one year. 

The Role of Roth Conversions in Retirement Planning 

Roth conversions can support retirement planning in several ways: 

1. Tax Diversification: By having funds in both tax-deferred and tax-free accounts, you gain flexibility in how you withdraw income each year, which can support better control over your tax situation. 
2. Reducing Future RMDs: Converting to Roth reduces the size of your tax-deferred accounts, which in turn may reduce the size of your required minimum distributions once you reach age 73. 
3. Legacy Planning: Inherited Roth IRAs can be withdrawn by beneficiaries tax-free (subject to required withdrawal timelines), which may be advantageous for passing wealth to heirs. 
4. Avoiding Tax Surprises: Managing the growth of tax-deferred accounts through conversions can help avoid unexpected tax liabilities in later retirement years when RMDs or other income sources may push you into higher brackets. 

It’s important to note that Roth conversions are not always beneficial for everyone. They require upfront tax payments and careful planning to determine whether the tradeoff is worthwhile. 

Considerations Before Making a Conversion 

Before pursuing a Roth conversion, evaluate the following: 

• Your Current Tax Bracket: If you’re already in a high bracket, the additional tax may outweigh the long-term benefit 

• Available Funds to Pay Taxes: It’s generally preferable to pay the tax with funds outside the retirement account 

• Income Needs: If you’ll need to access the converted funds soon, you may not get the full tax benefit 

• Time Horizon: The longer the funds stay in the Roth IRA, the greater the potential tax benefit due to compounding tax-free growth 

Working with a financial advisor and tax professional can help model different conversion scenarios and determine what aligns with your specific situation. 

Coordinating with Other Retirement Goals 

The role of Roth conversions in retirement planning should be viewed alongside other parts of your financial picture. For example: 

• If you’re planning to delay Social Security, a conversion may help fill an income gap while reducing future taxable income 

• If you have charitable intentions, combining conversions with qualified charitable distributions (QCDs) from other accounts could support multiple goals 

• If you expect rising tax rates in the future, locking in current rates through conversions may be a strategic hedge 

Every strategy comes with trade-offs, and conversions are no exception. Thoughtful integration into your broader plan is key. 

Revisiting Roth Conversions Over Time 

Your tax situation may change from year to year. Evaluating the role of Roth conversions in retirement planning annually can help you identify new opportunities. Whether you’re several years into retirement or still preparing to leave the workforce, the decision to convert may make more sense at some points than others. 

Evaluate the Role of Roth Conversions in Your Plan 

A Roth conversion isn’t the right choice for everyone, but when used thoughtfully, it can become a powerful tool in a tax-aware retirement strategy. Reviewing your income projections, tax exposure, and long-term goals can help determine whether—and when—a conversion might fit into your plan. 

Talk to SageGuard Financial Group About Roth Conversion Planning 

At SageGuard Financial Group, we work with clients to evaluate the role of Roth conversions in retirement planning as part of a broader tax and income strategy. If you’re considering whether a conversion fits your plan, contact us to schedule a conversation.