A Roth conversion moves money from a pre-tax account, such as a traditional IRA or 401(k), into a Roth IRA. You pay income tax on the amount you convert in the year you do it. After that, the money can grow and come out tax-free in retirement. There is no income limit on conversions.
How a Roth conversion works
- Open a Roth IRA if you do not have one.
- Ask your provider to convert some or all of your traditional IRA balance. A 401(k) can often be rolled straight into a Roth IRA.
- The converted amount is added to your taxable income for the year.
- You get a Form 1099-R and report the conversion on Form 8606.
Pay the tax from cash outside the account if you can. Using IRA money to pay it shrinks what is left to grow, and can trigger a 10% penalty if you are under 59½.
Example
You convert $20,000 while your taxable income is $60,000 as a single filer. Your income becomes $80,000, still in the 22% bracket in 2027, so the conversion costs about $4,400 in federal tax. From then on, that $20,000 and all its growth can come out tax-free after age 59½ once you meet the 5-year rule. See the 2027 tax brackets.
When a Roth conversion makes sense
- Low-income years: a gap year, early retirement before Social Security, or a year with big deductions.
- You expect higher taxes later, because your income or tax rates will rise.
- After a market drop: you convert more shares for the same tax bill.
- To reduce future required minimum distributions, since Roth IRAs have none for the original owner.
- Estate planning: heirs inherit Roth money tax-free, though most must empty it within 10 years.
When to think twice
- You are in a high bracket now and expect a lower one in retirement.
- You would have to pay the tax from the IRA itself.
- The extra income could raise your Medicare premiums (IRMAA) two years later, or cut tax credits and financial aid.
- You might need the money within five years.
The 5-year rules
Each conversion has its own 5-year clock for penalty-free access to the converted amount if you are under 59½. Separately, earnings are only tax-free once your first Roth IRA has been open five years and you are 59½ or older. Since 2018 you cannot undo (recharacterize) a conversion, so be sure before you convert.
Related: Roth vs traditional IRA, the backdoor Roth IRA and our Roth IRA calculator.
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Frequently asked questions
Is there a limit on how much I can convert?
No. You can convert any amount in a year, but all of it is taxable that year.
Can I convert part of my IRA?
Yes. Many people convert a little each year to stay in a lower tax bracket.
Do I need earned income to convert?
No. That rule applies to regular contributions, not conversions.
This article is general information, not financial or tax advice.
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