2026-10-21
A Roth conversion moves money from a pre-tax retirement account, such as a traditional IRA, into a Roth IRA. Whether it makes sense before December 31 depends on your income, your tax situation, your timeline and your goals. There is no single right answer, which is why it is worth a conversation with your advisor and CPA before year end.
This article is not a recommendation to convert or not to convert. It is a list of items to think about so you can walk into that conversation prepared.
What is a Roth conversion?
In a conversion, you move all or part of a traditional IRA (or another eligible pre-tax retirement account) into a Roth IRA. The IRS generally treats the pre-tax amount you convert as income for the year it is converted. Roth IRAs follow different rules from traditional IRAs, including how withdrawals are taxed and whether required minimum distributions apply during the original owner's lifetime. You can read the details in the IRS's Publication 590-A and its comparison of Roth IRAs and designated Roth accounts.
Why does year end matter?
A conversion is generally taxed in the year it takes place, so December 31 is the line between this tax year and next. Once the year closes, this year's income picture is mostly set. That is one reason many people review their numbers in the fall, while there is still time to make decisions.
Timing can also be a practical matter. Custodians often need time to process a conversion, and holiday schedules can slow things down. If a conversion is something you want to explore, starting the conversation in early to mid November leaves more room than waiting for the last week of December.
What should you think about before converting?
Here are questions that often come up. Not every one will apply to you.
1. How much extra income would the conversion add?
The converted amount may be added on top of your wages, business income, investment income and other earnings for the year. Some people look at how a conversion fits within their current tax bracket, and whether it could push part of their income into a higher one. Your CPA can estimate this using your actual numbers.
2. How does this year compare with future years?
Some people consider a conversion in a year when their income is unusually low, such as between jobs, early in retirement or before Social Security and required distributions begin. Others expect higher income later and wonder whether paying tax now may be worth considering. Nobody can know future tax rates or future income with certainty, so these are assumptions to test, not predictions to rely on.
3. Where will the tax money come from?
A conversion can create a tax bill, and you may need to plan for it. Many people prefer to pay it from money outside the retirement account, because using converted funds to pay the tax can reduce what ends up in the Roth IRA and may create additional tax consequences depending on your age. It is also worth asking whether you may need to adjust your estimated tax payments or withholding so the bill does not come as a surprise.
4. Could it affect Medicare premiums or other income-based items?
Higher income in one year can have effects beyond income tax. Medicare Part B and Part D premiums for higher-income beneficiaries are set using income reported to the IRS, and the Social Security Administration generally uses a tax return from about two years earlier. You can see how this works on the SSA's Medicare premiums page. If you are on Medicare or will be within a couple of years, ask how a conversion this year could show up later. Other income-based items, such as certain credits, deductions or marketplace health insurance subsidies, may also be affected.
5. Do you have other pre-tax IRAs?
When you convert from a traditional IRA that includes both pre-tax and after-tax money, the IRS generally looks across your IRAs to figure out how much of the conversion is taxable. If you have ever made nondeductible IRA contributions, the calculation is reported on Form 8606. This is an area where good records and professional help matter.
6. Do required minimum distributions apply to you?
If you are old enough that you must take a required minimum distribution (RMD) this year, the required amount generally cannot be converted. The IRS addresses this in Publication 590-A. Ask your advisor and CPA how the RMD and any conversion should be sequenced.
7. What if you change your mind?
Conversions made in 2018 or later cannot be recharacterized, which means they cannot be undone by treating them as having been made to a traditional IRA. The IRS states this in its Form 8606 instructions. Once a conversion is done, it is generally done, so it can help to review the numbers carefully before acting. Also ask about how long you may need to leave converted money in the account before withdrawals could be tax-free or penalty-free, since separate holding-period rules can apply.
8. How does this fit your bigger plan?
A conversion is one piece of a larger picture. It may connect to your retirement income plan, charitable giving, estate goals, the timing of Social Security, and what you hope to leave to heirs. For business owners, it may also depend on business income, which can vary from year to year. The right answer often comes from looking at these pieces together rather than treating the conversion on its own.
Why talk with your advisor before year end?
The questions above overlap, and the answers depend on details only you and your professionals can see: your income, filing status, accounts, tax history and goals. A conversion that looks sensible in one household may not fit another. Tax rules and thresholds also change, so current figures should come from your CPA or the IRS, not from a general article.
At FIRST Financial Group, we coordinate with your CPA and attorney so your personal plan and your business plan point in the same direction. Before a year-end conversation, it can help to gather:
- Your most recent tax return and a rough estimate of this year's income
- Statements for all traditional, SEP, SIMPLE and Roth IRAs
- Information on any nondeductible IRA contributions you have made
- Your Medicare or Social Security timeline, if relevant
- Your thoughts on how you would pay any resulting tax
Frequently asked questions
Do Roth conversions count as income?
Generally, yes. The pre-tax portion of an amount you convert is typically included in your taxable income for the year of the conversion. Your CPA can tell you how much of a conversion would be taxable for you.
What is the deadline for a Roth conversion this year?
For a conversion to count in a given tax year, it generally needs to be completed by December 31 of that year. Because custodians need time to process requests, ask your custodian about their cutoff dates well ahead of the holidays.
Can I undo a Roth conversion?
Not for conversions made in 2018 or later. The IRS does not allow a conversion to be recharacterized as a contribution to a traditional IRA, according to its Form 8606 instructions.
When might someone decide not to convert?
People sometimes decide against a conversion when it would add too much income in one year, when they cannot pay the tax from other money, or when the effect on Medicare premiums or other income-based items outweighs the benefit. Others find the idea does not fit their goals. Whether any of this applies to you is a question for your advisor and CPA.
Is a Roth conversion a good idea for everyone?
No. Whether a conversion fits depends on your income, your tax situation, your time horizon and your goals. Some people convert, some convert in stages and some decide not to convert at all.
Next steps
If you are wondering whether a Roth conversion deserves a place on your year-end list, bring your questions to your next review. You can book time with our team, and we can look at the question alongside your CPA. To learn more about how we approach these decisions, visit our Tax Planning and Financial Planning pages, or see our Year-End Financial Planning Checklist for Families.
This article is for general educational purposes only and is not tax, legal or investment advice, and it is not a recommendation to convert or not to convert any account. Roth conversions can increase your taxable income and may involve trade-offs, and conversions cannot be reversed. Tax rules, thresholds and limits change, and the right steps depend on your individual circumstances. Please consult your own tax and legal professionals before acting. Information from the IRS and Social Security Administration was reviewed as of October 21, 2026.