The benefits of Roth IRAs are undeniable: earnings and withdrawals are tax-free, and there are no required minimum distributions (RMDs). However, converting your traditional IRA to a Roth isn’t always right. In some situations, it could even be a costly mistake.

Should You Convert to a Roth IRA?

Before making a Roth conversion, it’s crucial to understand how it fits into your financial picture. Your current and future tax rates significantly influence whether a conversion makes sense. Unlike traditional IRAs and 401(k)s, which provide tax deductions now, a Roth conversion means you pay taxes today in exchange for tax-free withdrawals later.

A Roth conversion is typically most beneficial in years when your taxable income is lower than expected in the future. By paying taxes now, you avoid potentially higher taxes later when taking distributions from a traditional IRA or 401(k), which are taxed as income.

Uncertain Future Tax Rates

Tax rates can change due to legislative decisions. Tax brackets are set to rise in 2026 unless Congress extends the Tax Cuts and Jobs Act of 2017. Personal factors like selling property, receiving an inheritance, or losing tax deductions can also push you into a higher tax bracket. Required minimum distributions (RMDs), which begin at age 73 (rising to 75 in 2033), can also increase your taxable income, potentially triggering higher Medicare premiums and other tax consequences.

A Roth conversion can help mitigate these risks, but doing the math is important. Converting too much in one year might push you into a higher tax bracket, reducing the long-term benefit.

Impact on Heirs

Consider their tax situation if you plan to leave your IRA to beneficiaries. If your heirs are in lower tax brackets than you, leaving them a traditional IRA might be better so they pay less in taxes when withdrawing the funds. Conversely, if your heirs are in higher tax brackets, converting to a Roth now can help them avoid higher taxes on inherited funds.

Additionally, inherited IRAs must be emptied within 10 years of the original owner's passing, which can create a tax burden for beneficiaries. A Roth IRA helps alleviate this issue since withdrawals remain tax-free.

Consider Your Spouse’s Tax Situation

If you’re married, consider how your spouse’s tax situation might change after your passing. A surviving spouse often ends up in a higher tax bracket when they begin filing as a single individual. Converting to a Roth now might help reduce their future tax burden.

Alternative Strategies: Qualified Charitable Distributions (QCDs)

If you’re charitably inclined and at least 70½ years old, you can use qualified charitable distributions (QCDs) to donate up to $105,000 per year directly from your traditional IRA to a charity (increasing to $108,000 in 2025). This strategy reduces your taxable income while fulfilling your charitable goals. QCDs count toward your RMDs but don’t add to your taxable income.

State Tax Considerations and Medical Expenses

If you plan to move to another state, check whether that state taxes Roth conversions. Some states do, while others don’t, which can impact your decision. Additionally, keeping some funds in a traditional IRA can be useful for covering medical and long-term care expenses later in life, as these withdrawals could be deductible on your tax return.

A Balanced Approach

You don’t have to go all-in on a Roth conversion. Converting a portion of your traditional IRA over several years might help you manage tax brackets efficiently. For instance, converting just enough to stay within a lower tax bracket could be better than converting a more significant amount or an entire account all at once.

Final Thoughts

There’s no one-size-fits-all answer to whether you should convert to a Roth IRA. A well-planned conversion considers multiple factors: your current and future tax rates, retirement income needs, estate planning goals, and potential tax law changes.