Roth Conversion
Moving money from a pre-tax account into a Roth account, creating taxable income now.
A Roth conversion increases taxable income in the conversion year but allows future tax-free withdrawals.
To compare brackets and timing, see the traditional vs. Roth math guide and the Roth conversion ladder guide. If you are converting a 401(k), the 401(k) to IRA rollover guide and the pro-rata rule glossary help you avoid accidental tax surprises.
Common Conversion Paths
- Traditional IRA → Roth IRA (most common)
- Traditional 401(k) → Roth 401(k) (in-plan conversion)
- Traditional 401(k) → Roth IRA (rollover conversion)
Tax Impact
The amount converted is added to your taxable income for the year. If you convert $50,000, that’s $50,000 of additional ordinary income.
When Conversions Make Sense
- You’re in a low-income year (job transition, early retirement)
- You expect higher tax rates in the future
- You want to reduce future RMDs
- You’re doing a “backdoor Roth” strategy
The 5-Year Rule
Converted amounts have their own 5-year clock for penalty-free withdrawal of the converted principal (separate from earnings).
See related strategies:
How sharper.tax Helps
sharper.tax models the tax cost of a Roth conversion at your current marginal rate and compares it to the value of future tax-free withdrawals using a present value analysis. We also check for pro-rata rule complications before recommending a conversion. Sophisticated tax planning used to require a high-end CPA — we make it available for free.
Sources
- IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs)
- IRS Form 8606: Nondeductible IRAs
The information above is educational and not tax advice.