This article was prepared by the Patton Wealth Financial Planning Team with the support of ChatGPT

One of the most common questions in retirement planning is whether to convert traditional retirement savings into a Roth IRA. A Roth conversion involves moving money from a tax-deferred account, such as a traditional IRA or 401(k), into a Roth IRA. The key difference is in the taxation: traditional accounts are taxed when you withdraw funds in retirement, while Roth accounts grow tax-free and allow tax-free withdrawals later.

But here’s the catch: when you convert, you’ll owe income tax on the amount transferred. That makes timing absolutely critical. A Roth conversion can be a powerful wealth-building tool, but whether it makes sense depends heavily on your age, tax bracket, income needs, and retirement goals. Let’s break down when Roth conversions make the most sense at different life stages.

Roth Conversion Basics

Before diving into age-specific strategies, it’s helpful to review a few fundamentals:

• Tax Impact: Converting means paying taxes today to avoid taxes tomorrow. If your current tax rate is lower than your expected future rate, a conversion can save you money in the long run.
• Time Horizon: The longer your money can grow tax-free, the greater the benefit.
• RMDs (Required Minimum Distributions): Traditional IRAs require withdrawals starting at age 73 (increasing to 75 for some retirees). Roth IRAs have no RMDs during your lifetime, giving you more flexibility.
• Legacy Planning: Heirs can inherit Roth accounts and enjoy tax-free withdrawals, making Roth IRAs attractive for wealth transfer.

Roth Conversions in Your 20s and 30s

For young professionals just starting out, Roth conversions can be particularly powerful.

Why it makes sense:

• You’re likely in a lower tax bracket early in your career.
• Your investments have decades to grow tax-free.
• A Roth provides flexibility if tax laws change in the future.

Strategy:

If you already have a traditional IRA from a rollover or contributions, converting while your income is modest could be a smart move. Since you don’t need to withdraw for decades, the upfront tax hit today could translate into significant tax-free growth later.

Caution:

Be mindful of triggering higher taxes than necessary. Conversions could push you into a higher tax bracket or impact eligibility for credits (like student loan interest deduction). Converting smaller amounts over several years can help smooth the tax burden.

Roth Conversions in Your 40s

This is a “bridge” stage of life where income typically rises and financial responsibilities (mortgage, kids’ education, etc.) are at their peak.

Why it makes sense:

• If you expect your income to remain high into retirement, paying taxes now at a predictable rate could save money.
• Conversions diversify your tax strategy for retirement—giving you both taxable and tax-free accounts to draw from.

Strategy:

Consider partial conversions in years when your income is lower (such as after a job change, business loss, or when you max out deductions). Spreading conversions out over multiple years keeps you from spiking into higher brackets.

Caution:

If you’re saving heavily for kids’ college or paying down debt, you may prefer to direct funds there first. A conversion is irreversible, and taxes are due immediately, so balance it against other financial goals.

Roth Conversions in Your 50s

Your 50s are often your highest-earning years, but this is also when Roth conversions become especially strategic.

Why it makes sense:

• Retirement is within sight, so you can project your future income more accurately.
• Converting before Required Minimum Distributions kick in at 73 can reduce future tax burdens.
• You may have “income valleys”—years when your kids are out of college, or if you retire early but before taking Social Security.

Strategy:

Look for windows of lower income to do conversions. For example, if you retire at 58 but wait until 65 to claim Social Security and pensions, those years may offer prime opportunities to convert at a lower tax rate.

Caution:

Converting too much in your peak income years could push you into very high tax brackets. A gradual, multi-year conversion plan is often smarter.

Roth Conversions in Your 60s

This decade is all about retirement transitions—claiming Social Security, starting Medicare, and considering RMDs in the near future.

Why it makes sense:

• Reduces future RMDs from traditional IRAs.
• Gives you tax-free income flexibility in retirement.
• Can help manage Medicare premiums, which are income-based.

Strategy:

• Consider conversions in the years between retirement and age 73. This is often called the “sweet spot,” when you’re no longer earning a salary but haven’t yet started Social Security or RMDs.
• By converting strategically, you control how much taxable income you generate each year, potentially staying in a lower bracket.

Caution:

Watch how conversions affect Medicare premiums (IRMAA surcharges). Higher income can increase your Part B and Part D costs.

Roth Conversions in Your 70s and Beyond

Once you hit your 70s, Roth conversions become more complicated but can still make sense.

Why it makes sense:

• Conversions can still reduce the size of your future RMDs.
• They can also create a tax-free inheritance for your heirs.
• If you don’t need RMDs to cover living expenses, converting some of them can be part of estate planning.

Strategy:

Since RMDs must be taken first, you can only convert money above that required withdrawal. Some retirees use excess savings or RMDs they don’t need to pay taxes on a partial conversion.

Caution:

Conversions in your 70s can push you into higher tax brackets and impact Medicare premiums. At this stage, Roth conversions are often more about legacy planning than personal tax savings.

Key Takeaways by Age

• 20s–30s: Great for long-term growth if you’re in a low tax bracket.
• 40s: Useful for tax diversification, but balance with family obligations.
• 50s: Start serious planning—look for early retirement or lower-income years.
• 60s: Sweet spot between retirement and RMDs; major opportunity to optimize.
• 70s+: More about estate planning and minimizing RMD impacts.

Final Thoughts

Roth conversions aren’t a one-size-fits-all strategy. The right move depends on your tax bracket, retirement timeline, income sources, and estate planning goals. The decision is especially powerful when coordinated with tax planning, Social Security strategy, and investment goals.

For some, converting early in life maximizes growth. For others, waiting until their 60s offers the best tax savings. And for retirees in their 70s, conversions may still make sense—just with different objectives.

The bottom line: timing matters. A thoughtful, staged conversion plan—ideally created with the guidance of a financial advisor or tax professional—can help you pay less in taxes, grow more wealth tax-free, and create flexibility for both you and your heirs. We always recommend seeking tax advice from a tax professional and are always happy to model this in financial planning for our clients. Feel free to drop us an email if you would like us to build your financial plan at ClientConcierge4@PattonFunds.com