Labor Day is a natural moment to pause and reflect on what your hard work has built—and how to make the next phase of your plan even stronger. One strategy that can be worth discussing this time of year is a Roth conversion.
What it is
A Roth conversion means moving money from a traditional (pre-tax) IRA into a Roth IRA. You generally pay taxes today on the amount converted, and—if rules are met—Roth withdrawals in retirement can be tax-free.
Why it can be a good move (for the right household)
- More flexibility in retirement: Having both pre-tax and Roth savings can give you options to manage taxable income year by year.
- Potentially smaller future RMDs: Converting some assets may reduce future Required Minimum Distributions from traditional retirement accounts.
- Taking advantage of lower-income years: The years between retirement and starting Social Security (or other big income sources) can sometimes create an opportunity to convert at a more favorable tax rate.
- Legacy planning: Roth assets can be a tax-efficient way to pass wealth to heirs, depending on your overall plan.
Important trade-offs
A conversion can increase taxable income for the year and may affect items tied to income levels (like Medicare premiums). That’s why the amount and timing matter.
If you’d like, we can run a quick Roth conversion analysis to see whether it supports your bigger goals.
This is for educational purposes only and not individualized tax advice. Please consult a qualified tax professional regarding your situation.