When is the best time to do a Roth conversion?

The ideal time is during low-income years — such as early retirement before Social Security begins, a career gap, or a year with large deductions. The goal is to convert when your marginal tax rate is lower than it will be when you take withdrawals or face required minimum distributions later.

Is there a limit on how much I can convert to a Roth IRA?

No. Unlike Roth IRA contributions (which have income limits), there is no income limit or dollar cap on Roth conversions. However, you should be strategic about how much you convert in a single year to avoid pushing yourself into a higher tax bracket or triggering Medicare IRMAA surcharges.

Do Roth conversions make sense if I expect lower taxes in retirement?

Generally no. If you are confident your tax rate in retirement will be lower than today, keeping money in tax-deferred accounts and paying the lower rate later is usually better. Conversions are most valuable when you expect rates to be the same or higher in retirement — which is increasingly common given potential future tax legislation.

Roth Conversion — Retirement Lab Glossary

TL;DR

A Roth conversion moves money from a tax-deferred account (traditional IRA/401k) to a Roth IRA. You pay tax now, but future growth and withdrawals are tax-free forever. Done strategically during low-income years, conversions can save tens of thousands in lifetime taxes and eliminate required minimum distributions.

A Roth conversion is the process of transferring money from a tax-deferred account (such as a traditional IRA or 401(k)) to a Roth IRA. You pay income tax on the converted amount in the year of the conversion, but all future growth and qualified withdrawals are completely tax-free. Strategic Roth conversions can significantly reduce your lifetime tax burden and give you more flexibility in retirement.

How It Works

Choose an amount to convert from your traditional IRA/401(k) to a Roth IRA
Pay income tax on the converted amount at your current marginal rate
Wait 5 years (the Roth 5-year rule) before withdrawing converted amounts penalty-free
Enjoy tax-free growth — no taxes on future gains, and no taxes on qualified withdrawals after age 59½

There is no income limit for conversions (unlike Roth IRA contributions), and no limit on how much you can convert in a single year.

Why It Matters for Retirement Planning

The core question behind a Roth conversion is: "Will I pay less tax by converting now than I would by withdrawing from the traditional account later?"

Conversions are most valuable when:

You're in a low-income year: between retirement and Social Security/pension start, or during a career gap
Tax rates may rise: if you expect future tax rates to increase (due to legislation or higher personal income), paying today's rate locks in the lower rate
You want to eliminate RMDs: Roth IRAs have no required minimum distributions, giving you full control over when and how much to withdraw
You want to leave a tax-free inheritance: Roth IRAs pass to heirs with no income tax burden

A Practical Example

A retiree aged 62 has retired early and won't start Social Security until age 67. During this 5-year gap, their taxable income is low — perhaps $20,000/year from part-time work.

Without conversions, they'll reach age 73 with a large traditional IRA balance and face substantial RMDs taxed at a high marginal rate.

Strategy: Convert $40,000–60,000 per year during the low-income window, filling up the lower tax brackets. Over 5 years, they convert $200,000–300,000 at relatively low tax rates, permanently removing that money from future RMD calculations and future taxation.

Interactive chart: roth-conversion-timeline

Tax bracket optimization during the early retirement gap

Coming soon

Key Considerations

Don't convert too much in one year: large conversions can push you into higher tax brackets, trigger Medicare IRMAA surcharges, or cause Social Security benefits to be taxed
Pay taxes from outside the conversion: using non-retirement funds to pay the tax bill preserves the full converted amount for tax-free growth
State taxes matter: some states have no income tax, making conversions there particularly attractive
The tax-efficient withdrawal order should be considered holistically — Roth conversions are one piece of a broader tax strategy

Roth Conversions and Monte Carlo Simulation

While Retirement Lab currently uses a flat-rate tax model, understanding Roth conversions helps you interpret simulation results. A portfolio split between tax-deferred and Roth accounts will have different effective tax rates depending on withdrawal sequencing — and thus different real (after-tax) spending power than the gross portfolio value suggests.

Frequently Asked Questions

When is the best time to do a Roth conversion?: The ideal time is during low-income years — such as early retirement before Social Security begins, a career gap, or a year with large deductions. The goal is to convert when your marginal tax rate is lower than it will be when you take withdrawals or face required minimum distributions later.
Is there a limit on how much I can convert to a Roth IRA?: No. Unlike Roth IRA contributions (which have income limits), there is no income limit or dollar cap on Roth conversions. However, you should be strategic about how much you convert in a single year to avoid pushing yourself into a higher tax bracket or triggering Medicare IRMAA surcharges.
Do Roth conversions make sense if I expect lower taxes in retirement?: Generally no. If you are confident your tax rate in retirement will be lower than today, keeping money in tax-deferred accounts and paying the lower rate later is usually better. Conversions are most valuable when you expect rates to be the same or higher in retirement — which is increasingly common given potential future tax legislation.

Roth Conversion