Definition
What is a Roth conversion?
A Roth conversion moves money from a pre-tax retirement account, such as a traditional IRA or 401(k), into a Roth IRA. You pay income tax on the converted amount in the year of the conversion, and in exchange the money grows tax-free and is withdrawn tax-free in retirement.
The strategic question is timing. Converting in a lower-income year — for example, in early retirement before Social Security and required distributions begin — can let you pay tax at a lower rate now to avoid a larger tax bill later.
Done well over several years, Roth conversions can reduce your lifetime tax burden, lower future required minimum distributions, and leave heirs a tax-free inheritance. Done carelessly, they can push you into a higher bracket or trigger Medicare surcharges.
This definition is for educational purposes only and does not constitute investment, tax, or legal advice. Rules and thresholds change; consult a qualified professional about your situation.