Converting a traditional IRA or 401(k) to a Roth IRA can be one of the smartest long-term moves a retiree—or someone nearing retirement—can make. The allure of tax-free withdrawals, the absence of required minimum distributions (RMDs), and favorable treatment for heirs make Roth IRAs an attractive retirement planning tool.

But as with most things in life, there’s no free lunch. Any amount you convert is treated as ordinary income and taxed in the year of the conversion. So, the real strategy lies in how and when you convert, especially if you want to minimize the tax hit and maximize long-term value.

Let’s explore several effective approaches, complete with real-world scenarios and current tax brackets to help you think through your own strategy.

Why Consider a Roth IRA Conversion?

A Roth IRA offers several long-term benefits:

• Tax-Free Withdrawals: Qualified withdrawals—including all growth—are completely tax-free after age 59½ and five years of holding the account.
• No RMDs: Unlike traditional IRAs and 401(k)s, Roth IRAs are not subject to RMDs during your lifetime.
• Heir-Friendly: Roth accounts pass to heirs income-tax free (though inherited Roths are still subject to the 10-year rule for distribution).

The biggest downside? You must pay income taxes on the amount you convert. That’s why the key to a successful conversion is minimizing the tax bill. Below are some strategies to consider.

Convert in Low-Income Years

If you’re recently retired but haven’t yet started Social Security or RMDs, you may be in the lowest tax bracket of your adult life. That’s the ideal time to consider a Roth conversion.

Example: Sarah, age 60 and married, retires in 2025 and delays Social Security until 67. Her taxable income for 2026 drops to $30,000, placing her in the 12% marginal bracket (which caps at $96,950 for married couples in 2025). Sarah decides to convert $66,950 of her traditional IRA to a Roth. That conversion fills up the remainder of the 12% bracket without spilling into the 22% bracket, significantly lowering her tax bill.

Spread the Conversion Over Multiple Years

Trying to convert a large traditional IRA in one year can be a tax disaster. It can push you into a higher bracket and result in unnecessary taxation of Social Security benefits or Medicare surcharges.

Example: John, age 55, has a $500,000 traditional IRA. Instead of converting the full amount in one year, which would likely push him into the 32% or even 35% bracket, he converts $100,000 per year over five years. By staying within the 24% bracket, John saves thousands in federal income taxes compared to doing a lump-sum conversion.

Use Tax Loss Harvesting to Offset the Gain

This is one of my favorite strategies. If you’ve realized capital losses in your taxable investment accounts, they can be used to offset capital gains dollar-for-dollar. If your losses exceed gains, you can deduct up to $3,000 per year against ordinary income ($1,500 if married filing separately). While a Roth IRA conversion is considered ordinary income, capital losses cannot directly offset the taxable amount of the conversion. However, the $3,000 deduction can slightly reduce your overall taxable income, indirectly lowering the tax burden of the conversion.

Example: Lisa, 62, sold a few underperforming stocks, realizing a $15,000 capital loss. She converts $15,000 from her traditional IRA to a Roth IRA. While she cannot use the full loss to offset the conversion, she deducts $3,000 against her ordinary income for the year. The remaining $12,000 carries forward to future years, where it can be applied to capital gains or additional income deductions.

Pay the Tax from a Non-Retirement Account

Whenever possible, avoid paying the tax bill with funds from the converted account itself. Doing so not only reduces your investable base but could result in a 10% early withdrawal penalty if you’re under age 59½.

Example: Mark, 58, converts $75,000 to a Roth IRA. If he used IRA funds to pay the $15,000 tax bill, he’d owe a 10% penalty on the withdrawn tax amount (plus the tax itself). Instead, Mark uses savings from a brokerage account to pay the tax, preserving his retirement nest egg and avoiding penalties.

Convert Before Known Tax Increases

If you expect future tax hikes—whether due to changes in tax law, rising income, or additional sources of retirement income—converting now could lock in today’s lower rates.

Example: Emily, 50, currently earns $100,000 and files jointly. She’s in the 22% bracket, which covers income up to $201,800. Congress announces legislation that would raise income tax rates starting in 2026. Emily decides to convert $40,000 now while she’s still in the 22% bracket. If she waited until the higher brackets took effect, that same conversion could cost her 25% or more in taxes.

Bonus Tip: Watch for the Medicare IRMAA Surcharge

Higher income from a large Roth conversion can trigger the Income-Related Monthly Adjustment Amount (IRMAA), increasing your Medicare Part B and D premiums two years later. That’s another reason to keep conversions strategically sized.

Final Thoughts: Balance Today’s Taxes with Tomorrow’s Benefits

A Roth IRA conversion is a powerful tool—but only when used thoughtfully. For those expecting higher taxes in retirement, or who want to minimize RMDs and leave a tax-free legacy, Roth conversions can provide long-term peace of mind.

Whether you convert during a low-income year, spread it over time, or leverage capital losses and other smart tactics, the goal is the same: reduce the tax bite and maximize your retirement flexibility.

Consult with a tax professional to tailor a strategy to your specific situation, and remember—small, well-timed conversions often beat a single big one.