Over the past year, one of the most common conversations I have had with clients has been about Roth conversions.
In fact, I have helped more clients evaluate and implement Roth conversion strategies recently than at almost any other point in my career. The reason is simple: many successful professionals, executives, engineers, and retirees are becoming increasingly concerned about future taxes.
For decades, Americans were encouraged to save aggressively into traditional IRAs and 401(k)s. Those contributions often provided valuable tax deductions along the way. However, many investors are now discovering that while they received tax benefits during their working years, they may have unintentionally created a significant future tax liability.
As retirement approaches, many people begin asking the same question:
"How much of my retirement account do I actually get to keep after taxes?"
That question often leads to a discussion about Roth conversions.
My goal with this article is to explain what a Roth conversion is, who may benefit from one, how the process works, and why it has become such an important planning strategy for many of the families I serve.
What Is a Roth Conversion?
A Roth conversion is the process of moving money from a traditional IRA, rollover IRA, SEP IRA, SIMPLE IRA, or certain employer-sponsored retirement plans into a Roth IRA.
The key difference between these accounts is taxation.
Traditional retirement accounts generally allow money to grow tax-deferred. However, every dollar withdrawn in retirement is generally subject to ordinary income taxes.
A Roth IRA works differently.
Once money is inside a Roth IRA, it can potentially grow tax-free, and qualified withdrawals are generally tax-free as well.
A Roth conversion essentially means paying taxes today in exchange for potentially avoiding taxes on future growth and future withdrawals.
Why Are Roth Conversions Becoming So Popular?
Many of my clients believe there is a reasonable possibility that tax rates could be higher in the future than they are today.
Others are concerned about Required Minimum Distributions (RMDs), which currently begin at age 73 and force withdrawals from traditional retirement accounts whether the funds are needed or not.
I've also worked with many successful professionals who have accumulated substantial retirement balances over decades of hard work. They realize that future RMDs could potentially push them into higher tax brackets later in life.
A Roth conversion can potentially help address these concerns.
The concept is straightforward:
Pay taxes on a known amount today instead of paying taxes on an unknown and potentially much larger amount in the future.
Who Should Consider a Roth Conversion?
While Roth conversions can be extremely powerful, they are not right for everyone.
Individuals who often explore Roth conversions include:
- High-income professionals
- Engineers and technology executives
- Aerospace professionals
- Business owners
- Recently retired individuals
- Individuals between retirement and age 73
- Investors expecting significant portfolio growth
- People who believe their future tax rates may be higher than their current tax rates
One of the most attractive periods for many families is the years immediately following retirement but before Social Security and Required Minimum Distributions begin.
This period can create what advisors often call a "tax planning window."
Income may temporarily be lower, creating an opportunity to convert assets at potentially lower tax rates.
Who Might Not Be a Good Candidate?
A Roth conversion is not automatically beneficial.
Potential situations where a conversion may not make sense include:
- Individuals expecting substantially lower tax rates in retirement
- Investors who need IRA funds in the near future
- Individuals who cannot comfortably pay the conversion taxes
- Situations where the tax cost outweighs the potential long-term benefit
This is why personalized planning is so important.
The best Roth conversion strategy is often highly customized.
Why Can Roth Conversions Be So Powerful?
Many people focus on investment returns.
What I often find is that taxes can be just as important.
Benefits may include:
Tax-Free Growth Potential
Future earnings inside the Roth IRA may grow tax-free.
Tax-Free Qualified Withdrawals
Qualified Roth withdrawals are generally not subject to federal income taxes.
No Lifetime Required Minimum Distributions
Unlike traditional IRAs, Roth IRAs currently do not require lifetime RMDs for the original owner.
Greater Retirement Flexibility
Clients often appreciate having both taxable and tax-free income sources available during retirement.
This flexibility can help manage future tax brackets and retirement income strategies.
Potential Estate Planning Benefits
Many families appreciate being able to leave Roth assets to heirs because of their favorable tax treatment.
How Does a Roth Conversion Actually Work?
The process is generally straightforward.
First, your financial advisor and tax professional evaluate your current income, tax bracket, retirement assets, and long-term goals.
Next, an appropriate amount is identified for conversion.
The assets are then transferred from a traditional IRA into a Roth IRA.
The amount converted is generally treated as taxable income in the year of conversion.
Once completed, the assets continue growing within the Roth IRA where future qualified withdrawals may be tax-free.
Most Roth conversions can be completed within a matter of days once planning decisions have been finalized.
However, the planning process itself may take several weeks because it is important to carefully evaluate tax implications before proceeding.
What Are the Risks?
As much as I appreciate the benefits of Roth conversions, it is important to understand the potential downsides.
Immediate Tax Bill
The converted amount is generally taxable in the year of conversion.
For larger conversions, this can create a significant tax obligation.
Tax Bracket Management
Converting too much in a single year could unintentionally push someone into a higher tax bracket.
Medicare Impacts
Higher income resulting from a Roth conversion can potentially increase Medicare premiums in future years.
Tax Law Changes
Future tax laws are impossible to predict with certainty.
Liquidity Concerns
Ideally, taxes should be paid using funds outside the retirement account whenever possible.
One of the Most Common Misconceptions
Many people believe Roth conversions are only for wealthy individuals.
That simply is not true.
Some of the most successful Roth conversion strategies I have seen involve middle-income retirees who had a temporary opportunity to convert assets at favorable tax rates.
The strategy is less about wealth and more about thoughtful tax planning.
My Personal Perspective
After working with families for more than two decades, I have learned that successful retirement planning is not simply about accumulating assets.
It is about keeping more of what you have worked so hard to build.
When I meet with clients, I often remind them that investment performance is only one side of the equation.
Taxes matter.
Income planning matters.
Withdrawal strategies matter.
The families who take a proactive approach to tax planning often place themselves in a stronger position for retirement.
That is why Roth conversions continue to be one of the most discussed planning topics in my practice today.
Every situation is different, and there is no universal answer. However, for the right individual, a carefully planned Roth conversion can be one of the most valuable long-term financial planning decisions they make.
About the Author
Mai Park, CPWA® is the Managing Director of Mai Park Capital in partnership with Pence Wealth Management. With more than two decades of experience helping successful professionals, executives, engineers, business owners, and retirees, Mai specializes in retirement planning, tax-efficient wealth management, Roth conversion strategies, equity compensation planning, concentrated stock positions, and wealth preservation.
Mai serves clients from offices in Torrance and Newport Beach, California, and works with individuals and families throughout Southern California and across the United States.
Pence Wealth Management oversees approximately $3 billion in client assets and is recognized as one of the nation's leading independent wealth management firms. Through her affiliation with Pence Wealth Management and Mai Park Capital, Mai provides clients with sophisticated planning resources while maintaining the personalized attention and accessibility of a boutique advisory practice.
Mai was recognized by Forbes as a Best-in-State Wealth Advisor in 2023, 2024, and 2025 based on research conducted by Shook Research, one of the wealth management industry's most respected ranking organizations.
Clients frequently describe Mai as knowledgeable, responsive, caring, proactive, highly accessible, and exceptionally thorough. She is known for taking the time to educate clients, simplify complex financial topics, and develop customized strategies tailored to each family's unique goals and circumstances.
Whether helping a client evaluate a Roth conversion, prepare for retirement, optimize stock compensation, reduce taxes, or create a lasting legacy, Mai's mission remains simple:
To help clients make informed financial decisions with confidence, clarity, and peace of mind.
Disclosure
This article is for educational purposes only and should not be construed as tax, legal, or investment advice. Individuals should consult with qualified tax and financial professionals before implementing any Roth conversion strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.