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Why Now Is The Best Time For Roth Conversions

Financial experts say year-end could be a golden opportunity to shift retirement funds into tax-free growth.

By Adam Palasciano

Edited by Amanda Machado

Updated Nov. 25, 2025

If you're revisiting your retirement plan before year-end, a Roth conversion could be one of the smartest tax moves available. Converting a traditional pre-tax IRA into a Roth IRA now can lock in long-term tax advantages that compound for decades. With recent market stability and uncertainty about whether tax rates will change in the coming years, the timing could be especially favorable.

Here's why many financial planners say now may be the perfect moment to make the switch — and how to decide if it's right for you.

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What is a Roth conversion?

A Roth conversion involves transferring money from a pretax retirement account — like a traditional IRA — into a Roth IRA. You'll pay ordinary income taxes on the converted amount today, but all future earnings and withdrawals in retirement are tax-free.

This strategy is popular among retirees or near-retirees who expect to be in a higher tax bracket later in life. By paying taxes now at today's rates, they can shield future growth from taxation. Plus, Roth accounts aren't subject to required minimum distributions (RMDs), making them a flexible estate-planning tool.

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Why end of year might be the best time to do a Roth conversion

Financial advisors often recommend doing Roth conversions toward the end of the year (usually in Q4), when you have a clearer view of your total annual income and tax situation. Converting at year-end lets you fine-tune how much to move without potentially bumping yourself into a higher tax bracket.

What to consider before doing a Roth conversion

Before pulling the trigger, weigh several key factors to ensure a Roth conversion fits your broader financial goals. A well-timed conversion can reduce your lifetime tax bill, but it's not always the best move for every household. Understanding how it impacts your income, benefits, and withdrawal strategy is essential to avoid surprises later.

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Evaluate your current and future tax brackets

A conversion may make the most sense when your current tax rate is lower than what you expect in retirement. If you're in a low-income year — for instance, between jobs or before Social Security — the tax hit from converting may be minimal compared with future savings.

Conversely, if you're close to a higher bracket or expecting major income, it may be smarter to wait. Running a multiyear tax projection can help you identify the ideal amount to convert without triggering unnecessary taxes.

Make sure you have cash to cover the taxes

If you choose to do a Roth conversion, you'll owe taxes upfront on the converted balance, potentially reducing the amount that can grow tax-free.

Ideally, you should plan for the tax bill in advance — either by setting aside savings or using non-retirement assets. Alternatively, to reduce upfront taxes, some advisors recommend leveraging a market downturn to convert a smaller balance and pay less upfront taxes.

Afterwards, investors can benefit from tax-free growth in a Roth account once the market ultimately recovers.

Understand the potential impact on Medicare and benefits

Large conversions can temporarily increase your adjusted gross income, which could potentially raise Medicare premiums or affect eligibility for certain tax credits. Running the numbers with a tax advisor helps avoid unpleasant surprises.

Coordinating your conversion strategy with your healthcare and income planning can prevent costly overlaps.

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Ways to increase retirement savings

Even if a full Roth conversion isn't right for you, there are other ways to boost your long-term retirement readiness. Taking a few consistent actions now can significantly improve your outcomes, especially when combined with tax-efficient planning and disciplined saving.

Max out your tax-advantaged contributions

For tax year 2025, workers can contribute up to $23,500 to a 401(k), and if you're age 50 or older, you can add an extra $7,500 as a catch-up contribution. On the IRA side, the 2025 contribution limit remains $7,000, with an additional $1,000 catch-up for those age 50 or older.

Maxing out these accounts — or at least contributing enough to get your full employer match — lays a strong foundation of tax-advantaged savings. If you can't hit the limit immediately, plan to increase your contribution rate gradually (for example, by 1 % each year) — these small step-ups can add up significantly over time.

Diversify between Roth and traditional accounts

If possible, consider splitting contributions between traditional pre-tax and Roth (post-tax) accounts to hedge against future tax uncertainty. Having both types gives you greater flexibility when choosing which funds to draw from in retirement, depending on your tax bracket at the time.

A diversified retirement account mix helps manage tax risk, and regular reviews as your income and goals evolve can keep your strategy on track.

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Consider after-tax investment options

Once your retirement accounts are maximized, channeling additional savings into a taxable brokerage account opens up more flexibility. You'll benefit from long-term capital-gains rates, easier access before retirement age, and opportunities like tax-loss harvesting.

This layered approach complements your tax-advantaged accounts and can help keep your investment strategy balanced for multiple goals.

Bottom line

A Roth conversion can be one of the most powerful financial moves available — especially while tax rates remain historically low. By acting before year-end, you may lock in tax-free growth, reduce future RMDs, and create more flexibility for estate planning and retirement income.

Taking time to evaluate your situation now can help you set yourself up for retirement with a plan designed to maximize both tax efficiency and long-term financial freedom.

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