When is the Right Time for A Roth Conversion?

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As retirement approaches, financial planning becomes increasingly important to ensure a secure and comfortable future. One strategy that warrants serious consideration is doing a Roth conversion. By converting pre-tax funds into Roth funds, individuals can enjoy tax-free growth and tax-free withdrawals in retirement. However, timing plays a crucial role in maximizing the possible benefits. In this article, we will explore the factors to consider and the optimal time for a Roth conversion.

Important Considerations

Current Tax Rate vs. Projected Future Tax Rate

When deciding whether you should convert funds to a Roth IRA, comparing your current tax rate to your projected future tax rate is key. Since conversions accelerate taxable income, it may be beneficial to convert funds during low-income years to take advantage of lower tax brackets. Here are two instances that would present opportunities for lower income:

Gap in Income During Working Years: Many individuals experience a decrease in income during their working years due to lower incentive compensation (bonus or commission), or a change in job that creates a gap in employment during the year. By converting funds during this period, you can potentially minimize the tax impact.

Lower Income Before Reaching Social Security, RMDs, and Company Pension: Right after retiring and before you begin to draw Social Security benefits, required minimum distributions (RMDs), or a company pension, your income is likely to be lower. This can create a favorable window for Roth conversions, as you may have more control over your taxable income.

Optimal Time To Convert

While it is challenging to predict market fluctuations, choosing the right time within the year for Roth conversions can enhance the potential benefits. Although we can’t accurately time the market, ideally, you would want to convert funds when the markets are at their lowest point. However, predicting market movements is nearly impossible; instead, focus on your long-term retirement goals rather than short-term market fluctuations. Consistency and a disciplined approach are key.

Synergy with Tax-Deduction Strategies
Roth conversions accelerate income, which may result in higher tax liabilities. To counterbalance this effect, consider combining your conversion strategy with a tax-deduction strategy. One effective method is to make charitable gifts and potentially group them for multiple years using a donor-advised fund. By bunching deductions, you can reduce your taxable income and offset the tax impact of a Roth conversion.

Historical Tax Rates
In addition to comparing your current tax rates to your projected future rates, it is important to consider historical tax rates and trends, which can provide valuable insights into the current tax landscape and help you make informed decisions regarding Roth conversions. As of 2023, tax rates are at 30-year lows, which presents a unique opportunityduring periods of historically low tax rates, Roth conversions can be particularly beneficial. While it is impossible to predict the exact trajectory of tax rates, converting funds to a Roth IRA now would allow you to lock in the lower tax rates, potentially shielding your retirement savings from higher taxes in the future.


Determining the optimal time to convert funds to a Roth IRA is a crucial component of strategic financial planning for individuals approaching retirement. By assessing your current tax rate and projected future tax rate, you can identify advantageous timing for conversions. Additionally, understanding the potential benefits of timing conversions during low-income years and utilizing income-deduction strategies can further enhance the advantage.

It is important to note that the information provided here is intended for educational purposes only and should not be construed as tax advice. Tax planning should always be done in consultation with a knowledgeable financial advisor or tax professional who can provide personalized advice based on your specific circumstances and guide you toward making informed decisions. They can evaluate historical tax rates, current tax laws, and your personal financial goals to help you determine the most appropriate strategy and timing for a Roth IRA conversion.

By effectively navigating the complexities of Roth conversions and incorporating them into your retirement plan, you can optimize your financial situation and set yourself up for a more secure and tax-efficient retirement.

Matthew Benson, CFP®

Owner / Certified Financial Planner™

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Important Disclosure

Advisory services are offered through Sonmore Financial LLC, an Investment Advisor in the State of Arizona.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

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