Roth IRA Conversion: How to Convert Traditional IRA to Roth and When It Makes Sense

How Roth IRA Conversions Work

The mechanics of a Roth IRA conversion are straightforward. You contact your IRA custodian and request a conversion from your Traditional IRA to your Roth IRA. The custodian will move the assets (in cash or as an in-kind transfer of securities) from the Traditional IRA to the Roth IRA. The full amount of the conversion is added to your taxable income for the year. You pay taxes out of pocket (not from the IRA) to maximize the benefit. If you use IRA money to pay the taxes, that amount is considered a distribution and may be subject to early withdrawal penalties if you are under 59.5.

You can convert any amount, from $1 to your entire IRA balance. There is no income limit on Roth conversions — anyone can convert regardless of income level. You can do multiple conversions per year. You can also recharacterize (undo) a conversion if you change your mind — but only if done by the tax filing deadline (including extensions) of the conversion year. The SECURE 2.0 Act changed the recharacterization rules: conversions made in 2018 or later cannot be recharacterized after October 15 of the year following the conversion. Previously, you could recharacterize up to October 15 of the following year regardless of when you converted. This makes it more important to be certain before converting.

The Pro-Rata Rule: Why It Matters for Roth Conversions

The pro-rata rule applies when you have both pre-tax and after-tax (non-deductible) money in your Traditional IRAs. The IRS treats all your Traditional IRA, SEP IRA, and SIMPLE IRA balances as one pool. When you convert a portion to Roth, you cannot choose to convert only the after-tax portion — the conversion is pro-rata based on the ratio of pre-tax to after-tax money across all your IRAs.

Example: You have $50,000 in pre-tax Traditional IRA money (from deductible contributions and earnings) and you contribute $10,000 non-deductible (after-tax) to a Traditional IRA. Your total IRA balance is $60,000. The pre-tax portion is 83.3% ($50K/$60K) and the after-tax portion is 16.7% ($10K/$60K). If you convert $10,000 to Roth, 83.3% ($8,333) is taxable and 16.7% ($1,667) is tax-free. This is why the Backdoor Roth IRA strategy is most effective when you have zero pre-tax IRA balance. To avoid the pro-rata rule, roll your pre-tax IRA money into a 401(k) before converting. Read our Backdoor Roth IRA guide for a detailed explanation of the pro-rata rule and how to avoid it.

The 5-Year Rule for Roth Conversions

The 5-year rule for Roth conversions states that converted funds must remain in a Roth IRA for at least 5 years before they can be withdrawn penalty-free. The 5-year clock starts on January 1 of the year of conversion. Each conversion has its own 5-year clock. If you withdraw converted funds before the 5-year period is up, the withdrawn portion may be subject to a 10% early withdrawal penalty.

There is an important nuance: contributions to a Roth IRA can be withdrawn at any time tax-free and penalty-free because contributions are made with after-tax money. But conversions are different — they are treated as a separate category. Within the 5-year window, withdrawals of converted amounts are subject to the 10% penalty on the portion that was taxable upon conversion. The 5-year rule applies only to the taxable portion of conversions. If you converted non-deductible contributions (after-tax basis), that portion is not subject to the 5-year rule because it was already taxed. However, earnings in the Roth IRA are subject to both the 5-year rule and the age 59.5 requirement for qualified distributions. For most retirees who intend to leave the money in the Roth IRA until age 59.5 or later, the 5-year rule is not a concern. See our retirement planning guide for more on withdrawal timing and rules.

Backdoor Roth IRA vs Roth Conversion: What's the Difference?

The Backdoor Roth IRA and a Roth IRA conversion are technically the same process — moving money from a Traditional IRA to a Roth IRA. However, they serve different purposes. A Backdoor Roth IRA is a contribution strategy for high earners who exceed the Roth IRA income limits. You contribute to a Traditional IRA (non-deductible) and convert immediately. The contribution limit is $7,000 ($8,000 if 50+) for 2024. A Roth conversion is typically a larger, strategic transaction where you convert existing pre-tax IRA money to Roth, paying taxes on the full amount. There is no limit on how much you can convert.

The key difference is intent: Backdoor Roth is about getting new contributions into a Roth IRA despite income limits. A Roth conversion is about moving existing pre-tax savings to Roth, usually at a strategic time when your tax rate is lower than expected. Many people use both strategies — doing a Backdoor Roth IRA contribution each year while also doing larger Roth conversions in low-income years, such as after retiring but before starting Social Security and RMDs. This window between retirement and RMDs (often ages 60-72) is called the "Roth conversion sweet spot" because you have lower taxable income but time for the converted money to grow tax-free. Our Roth conversion ladder guide explains how to do systematic conversions over multiple years.

When Roth Conversions Make Sense (and When They Don't)

Roth conversions are most beneficial when your current marginal tax rate is lower than your expected future marginal tax rate. Here are scenarios where conversions make sense. Low-income years: You are between jobs, retired early, on sabbatical, or have a year with large deductions. Converting at a 10%, 12%, or 22% marginal rate instead of paying 24%, 32%, or 37% later is a significant win. Early retirement before RMDs: The gap between retirement and RMD start age (73-75) is the ideal conversion window. You control your income and can convert up to the top of your desired bracket each year. High RMD expectations: If your Traditional IRA is large and you expect RMDs to push you into higher brackets, converting now reduces future RMDs.

Roth conversions are less beneficial when you expect lower future tax rates, when you need the IRA money for near-term expenses (because you pay taxes now and lose the IRA growth), or when you are in a high tax bracket and expect to be in a lower one in retirement. Roth conversions can also increase Medicare premiums (IRMAA) two years after the conversion and increase the taxability of Social Security benefits. Always model the full impact before converting large amounts. For a complete analysis of Roth conversion scenarios, see our tax planning guide.

Real-World Conversion Example

David, age 62, retires with $800,000 in his Traditional IRA. He has a 5-year gap before Social Security at 67 and an 11-year gap before RMDs start at 73. His only income is $30,000 from a small pension and capital gains. He plans to convert $60,000 per year from his Traditional IRA to Roth for 10 years. In years 1-5, his total income is $90,000 ($30K pension + $60K conversion). In years 6-10 (after Social Security at $30K/year), his total income is $120K ($30K pension + $30K SS + $60K conversion). At the 12% bracket (up to $94K for single in 2024), he converts tax-efficiently. After 10 years, he has converted $600,000, paying approximately $72,000 in total tax. His remaining Traditional IRA (approximately $200K plus growth on the converted portion) has much lower RMDs. The $600,000 in his Roth IRA grows tax-free for the rest of his life. Without the conversion strategy, David would face RMDs of approximately $28,000/year starting at 73, pushing him into higher tax brackets. The conversion saved him an estimated $50,000+ in lifetime taxes.

Do I have to pay taxes on a Roth IRA conversion?

Yes, you pay income tax on the pre-tax portion of any amount you convert. The converted amount is added to your ordinary income for the year and taxed at your marginal tax rate. You cannot avoid this tax. For after-tax (non-deductible) contributions in your Traditional IRA, the conversion of that basis is tax-free. You must file Form 8606 with your tax return to track your IRA basis and properly calculate the taxable portion of your conversion. Pay the conversion tax from a separate taxable account (not from the IRA itself) to maximize the benefit of the Roth conversion. Using IRA money to pay the tax results in that money being treated as a distribution, potentially incurring a 10% early withdrawal penalty if under 59.5.

Can I do a Roth conversion if I have a 401(k)?

Yes, you can convert a 401(k) to a Roth IRA, but you must first roll the 401(k) to a Traditional IRA (if you want to do direct conversion) or use an in-plan Roth conversion if your 401(k) plan allows it. Rolling a 401(k) to a Traditional IRA gives you full control over conversion timing and amounts. Converting directly from a 401(k) to a Roth IRA is a two-step process: roll the 401(k) to a Traditional IRA, then convert the Traditional IRA to Roth. You can also do an in-plan Roth conversion (also called a Roth rollover) within your 401(k) if the plan offers a designated Roth account. The tax treatment is the same: you pay income tax on the converted amount. If you are still working, the 401(k) rollover to IRA may not be allowed unless you have separated from service or the plan allows in-service distributions.

What is the best age to do a Roth conversion?

The best age for Roth conversions depends on your financial situation, but there are common patterns. The most popular window is ages 60-70: you have retired (lower income), but before RMDs start and before Social Security begins. This gives you several years of controlled income in a lower bracket. Another good window is ages 30-40 for high earners who expect their income to increase significantly — converting during lower-income years can be very beneficial. For retirees with large IRAs, the period between retirement and age 73 (when RMDs start) is the most commonly recommended conversion window. Avoid converting in years when you are near the threshold for Medicare IRMAA surcharges, as the conversion income two years prior affects your Medicare premiums.

Can I undo a Roth IRA conversion?

You used to be able to recharacterize (undo) a Roth conversion by the tax filing deadline of the following year. Under the SECURE 2.0 Act, conversions made in 2018 or later cannot be recharacterized after October 15 of the year following the conversion. This means you have a limited window to reverse a conversion. If you convert in 2026, you have until October 15, 2027, to recharacterize it back to a Traditional IRA. After that date, the conversion is permanent. This change makes it critical to be confident in your decision before converting. If you are uncertain, consider converting in smaller amounts or consulting a tax professional before making large conversions. Our tax planning guide can help you evaluate whether a Roth conversion fits your overall strategy.

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