Are you thinking about converting your traditional IRA to a Roth IRA? You’re not alone. Many folks are weighing this option as they plan for retirement, and for good reason. A Roth IRA can offer more flexibility later on, but that doesn’t mean the move is right for everyone.

At Heritage Wealth Retirement Planning, we help clients figure out whether this strategy fits their bigger picture. 

If you want guidance built around your actual needs, give us a call at (630) 868-9127 to talk it through. In the meantime, let’s unpack the topic and help you feel more informed.

Understanding the Pros and Cons: Should I Convert to Roth IRA?

Before we go too far, let’s get the basics down. When people ask, “Should I convert to Roth IRA?” what they’re really wondering is: Is it smart to pay taxes now to enjoy tax-free withdrawals later?

A traditional IRA gives you a tax break up front. Your contributions may be deductible, and your money grows tax-deferred. However, once you retire, those withdrawals are taxed as income.

A Roth IRA flips that: you pay income taxes on the money now, but once you’re retired, your withdrawals, including any growth, can be completely tax-free. No required minimum distributions. No tax surprises.

Sounds pretty good, right? But it comes with a catch—you’ll owe taxes on the amount you convert in the year you do it. And depending on your income, that could mean a pretty hefty tax bill.

Let’s break down the upsides and the tradeoffs so you can figure out whether this move makes sense for you.

The Benefits of Converting to a Roth IRA

You’re probably looking for more than just one reason to make the switch. Here are a few common advantages people consider:

1. Tax-Free Income Later

Once your money is in a Roth IRA and after the five-year rule, you can withdraw both contributions and growth tax-free. That’s a big deal if you expect your tax rate to go up later.

2. No Required Minimum Distributions (RMDs)

Traditional IRAs require you to start taking withdrawals at age 73. Roth IRAs don’t. That gives you more control over your income in retirement and lets your money grow longer if you don’t need it right away.

3. Easier Estate Planning

Heirs who inherit a Roth IRA won’t owe income tax on distributions. While they still must withdraw funds within 10 years under current law, those withdrawals won’t trigger a tax bill.

4. Hedge Against Future Tax Increases

Nobody knows what tax policy will look like in 10 or 20 years. Paying taxes now, when rates are historically low, is a smart move.

Why You Might Think Twice

1. Upfront Taxes Can Be Expensive

Depending on how much you convert, your taxable income for the year could spike—possibly pushing you into a higher tax bracket. That could mean a much bigger tax bill than expected.

2. Using IRA Funds to Pay Taxes Reduces Future Growth

If you don’t have outside funds to pay the tax on the conversion, you might be dipping into your IRA to do so. That reduces the amount that can grow over time in your Roth.

3. Uncertainty About Your Future Tax Bracket

You may expect to be in a higher bracket later, but that’s not always the case. If your income is likely to drop in retirement, converting now might not save you much—or anything at all.

4. It’s Hard to Undo

Until 2017, you could “recharacterize” or reverse a Roth conversion. That’s no longer an option. Once it’s done, it’s done.

Should I Convert to Roth IRA All at Once?

Here’s another angle that’s often overlooked: You don’t have to convert everything at once.

Many people assume it’s an all-or-nothing move, but partial conversions can offer more control over your tax hit. You can convert just enough each year to stay within your current tax bracket.

This type of staggered approach allows you to shift money over time at a pace that suits your budget and retirement goals. It also gives you the flexibility to stop if tax laws change or your income drops unexpectedly.

This is where working with a financial professional becomes especially helpful. At Heritage Wealth Retirement Planning, we help you map out your income, tax exposure, and timing to determine how much to convert, if any.

Key Questions to Ask Before Converting

Deciding whether to convert your traditional IRA isn’t just about the numbers. It’s also about how you want to manage your retirement income. Ask yourself:

• Will I be in a higher tax bracket later?

• Do I have cash on hand to cover the taxes now?

• Do I want to leave tax-free assets to my heirs?

• How long will I leave the money invested before I need it?

• Will the conversion affect other parts of my financial life, like Medicare premiums?

Even if the idea sounds good in theory, your specific answers can shift the math one way or the other.

When Should You Consider a Conversion?

There are a few key moments when converting could be more appealing:

After Retirement But Before RMDs Kick In

If you’ve retired but haven’t started taking Social Security or RMDs yet, your income may be temporarily lower. That makes it a smart time to convert without hitting high tax brackets.

During a Market Downturn

If your IRA has temporarily dropped in value due to a market pullback, converting during that dip means you’ll owe less in taxes. And when markets rebound, that growth happens inside your Roth, tax-free.

Before Major Tax Law Changes

If Congress announces an increase in future tax rates, converting now may shield more of your income under today’s lower rates. Keep an eye on legislative news.

Tax Planning and Conversion Go Hand in Hand

You can’t talk about a Roth conversion without looking at the tax piece. And this is where many folks get caught off guard.

That’s why tax-smart planning is central to the process. A well-timed, partial conversion might be better than doing everything in one shot. Or it may be better to wait altogether.

At Heritage Wealth Retirement Planning, we don’t rush the process. We take the time to look at:

• Your current and expected future income

• How much room do you have in your current tax bracket?

• Whether a conversion will impact your Medicare premiums

• How it affects other parts of your retirement income strategy

We’re here to make sure you understand all the moving parts, so your choice fits your bigger goals.

Who Should Consider a Roth Conversion?

So, should I convert to Roth IRA? The answer depends, but here are a few groups that often benefit:

• Younger retirees with low income before RMDs begin

• People expecting high Social Security income or pensions that could push them into higher tax brackets

• Those with large traditional IRA balances looking to reduce future RMDs 

People planning to leave assets to heirs who might be in higher tax brackets

What Happens After You Convert?

Once you convert, the funds move into a Roth IRA account. The IRS gets notified, and you’ll report the converted amount as income on your tax return that year.

You’ll also need to track your five-year clock. To take tax-free earnings, you must wait five tax years after your first Roth IRA contribution or conversion. 

Again, planning with a trusted advisor can help you stay ahead of these timelines and avoid unpleasant surprises.

Let’s Talk About What Works for You

Your retirement shouldn’t be guesswork. You should build it around your life and the goals you care about most.

Thinking about a Roth conversion? How might it impact your taxes, income, or estate plan?

Call Heritage Wealth Retirement Planning at (630) 868-9127 or visit Heritage Wealth to schedule a conversation that’s built around you—not a cookie-cutter formula.