Retirement Retirement Planning

This IRA Move Could Earn You Six Figures More in Retirement Savings

A well-timed tax strategy can increase how much of your retirement money you actually keep.

By Adam Palasciano

Edited by Kristy DeSmit

Updated Feb. 19, 2026

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Timing matters when it comes to retirement taxes, and one strategic move could help you keep more of what you earn over the long run.

For some savers, converting a traditional IRA to a Roth IRA during lower-income years can significantly increase lifetime income. The benefit does not come from higher investment returns, but from paying taxes at the right time. When done carefully, this strategy can meaningfully reduce future tax drag on retirement savings.

Here's how a Roth IRA conversion can turn tax planning into real money.

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Roth IRA conversion explained

A Roth IRA conversion involves moving money from a pre-tax retirement account, such as a traditional IRA or 401(k), into a Roth IRA. The amount converted is treated as taxable income in the year of the conversion, meaning you owe income taxes upfront.

Once inside the Roth IRA, however, the money grows tax-free, and qualified withdrawals in retirement are also tax-free. This approach can be powerful for investors who expect higher tax rates later or who want more control over taxable income in retirement.

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How the Roth IRA conversion strategy works

The appeal of a Roth conversion lies in tax timing rather than market performance. Paying taxes today at a lower rate can prevent much larger tax bills later when balances are higher and required withdrawals begin. After conversion, all future growth escapes taxation, which compounds the benefit over decades.

The strategy is most effective when conversions occur during lower-income years, such as early career periods, job transitions, or early retirement before required minimum distributions (RMDs) begin.

How a Roth IRA conversion might work out

Consider a simplified example to see how tax timing creates value. Suppose someone converts a traditional IRA during a lower tax year and allows the money to compound tax-free for decades. Even though the upfront tax bill feels painful, the long-term payoff can be substantial when withdrawals are no longer taxed.

Let's take a look at a new hypothetical scenario using the following assumptions:

You are 30 years old
You have $120,000 in a traditional IRA
You plan to retire at age 62
Your current marginal tax rate is 22%
Your projected retirement tax rate is 35%
Your investments earn an average of 8% annually

If you convert the full $120,000 today, you would owe $26,400 in taxes upfront at a 22% rate. That $120,000 would then grow tax-free for 32 years. At an 8% annual return, the Roth IRA would be worth roughly $1.41 million at age 62 (assuming annual compounding), all available without future taxes.

If you do not convert and leave the money in a traditional IRA, it would also grow to about $1.41 million. However, withdrawals would be taxed at your projected 35% retirement rate, leaving approximately $916,500 after taxes. The difference between the two outcomes is roughly $493,500 — created entirely by smarter tax timing, not higher investment returns.

Why lower-income years matter so much

Roth conversions are not universally beneficial, and timing is everything. Converting during peak earning years can push income into higher tax brackets, reducing or eliminating the advantage.

On the flipside, lower-income years allow you to convert at a reduced tax cost while still capturing decades of tax-free growth. This window may often appear earlier in a career or during the gap years between work and Social Security or RMDs.

Staggered conversions are another option

Instead of converting an entire IRA balance at once, investors may spread conversions across multiple years. This approach helps prevent income from jumping into higher tax brackets in any single year.

Staggered conversions also make the tax bill more manageable by distributing it over time rather than paying a large lump sum all at once. A common strategy is to convert only enough each year to fully use a lower tax bracket without exceeding it.

Risks and considerations to keep in mind

Roth conversions increase taxable income in the year they occur, which could potentially impact eligibility for tax credits or other benefits. Paying conversion taxes from the IRA itself can also reduce the strategy's effectiveness.

Future tax laws may change, adding uncertainty to long-term projections. Because of these variables, Roth conversions work best as part of a broader, personalized retirement plan.

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Bottom line

A Roth IRA conversion during lower-income years can generate hundreds of thousands of dollars in additional after-tax retirement income by shifting when taxes are paid. The benefit comes from eliminating future tax drag, not from taking on more investment risk.

Evaluating tax brackets, income timing, and long-term goals together can help you make the right moves and lower your financial stress as retirement approaches.

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