What Is a Roth Conversion?

A Roth conversion is the process of moving money from a traditional IRA, 401(k), or other pre-tax retirement account into a Roth IRA, triggering ordinary income tax on the converted amount in the year of the conversion. In exchange for paying that tax now, the converted money grows tax-free and qualified withdrawals in retirement are completely free of income tax. Roth conversions make the most sense when your current tax rate is lower than you expect it to be in retirement — for example, in a year when your income is unusually low, after retirement before Social Security and RMDs begin, or when you believe tax rates will rise in the future. There is no income limit on Roth conversions, which is why the backdoor Roth strategy is available even to high earners. Large Roth conversions can temporarily push you into a higher tax bracket and increase your Medicare premiums for two years, so careful timing and partial conversions over multiple years often make sense.