When Does a Roth Conversion Make Sense for a High-Net-Worth Household?

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Few questions come up in our client meetings as often as this one: “Should we convert to a Roth?” It’s a fair question. It’s also one where the honest answer is “it depends.”

For high-net-worth families, the stakes are higher. You may have millions in traditional IRAs and 401(k)s. The pre-tax money in those accounts generally carries an income-tax bill that you or your beneficiaries will eventually pay. A Roth conversion lets you choose when to recognize that income.

Here’s how we think it through.

What a conversion actually does

A Roth conversion moves money from a traditional IRA into a Roth IRA. The catch is that the IRS treats the untaxed amount you move as income in the year you convert.

In return, qualified withdrawals later won’t be taxed. You’re paying the tax now so that you, or your heirs, don’t pay it later.

There’s one more thing to know up front. Once you convert, you can’t undo it. The IRS stopped allowing conversions to be reversed starting in 2018. That’s why we plan carefully before acting.

The math starts with your tax bracket

The core question is simple. Is your tax rate likely to be lower today than it will be later? If so, converting often makes sense.

We also consider state income taxes and who is likely to make the withdrawals. A move to a different state can change the comparison. So can the death of a spouse: a surviving spouse may eventually file as single, with narrower federal tax brackets. For money intended for children, their likely tax rates belong in the analysis too.

For 2026, a married couple filing jointly stays in the 24% bracket until taxable income tops $403,550. The 32% bracket runs up to $512,450. Above that, rates climb to 35% and then to 37% for income over $768,700.

That gives many families room to “fill up” a bracket. Say you’re retired, married filing jointly, and your taxable income before a conversion is $250,000. You could convert about $150,000 and still stay in the 24% federal bracket. That assumes the entire conversion is taxable and doesn’t change your deductions or other taxable income.

The years between retirement and the start of required withdrawals are often the sweet spot. Your paycheck has stopped, so your income may be lower than it’s been in decades. That window can be the cheapest time to convert.

What about investment growth?

You might assume a conversion pays off more if your account appreciates significantly. If your tax rate stays the same and you pay the conversion tax from the IRA, growth alone doesn’t change the comparison. Say you have $100,000 in an IRA and a 24% tax rate. Assume the IRA is entirely pre-tax, you’re over age 59½, and your Roth withdrawals will be qualified. You withdraw $100,000, convert $76,000 to a Roth, and use the remaining $24,000 to pay the tax. If that doubles, you have $152,000 tax-free. Leave it in the IRA instead, and it doubles to $200,000. After 24% tax, you keep the same $152,000.

Growth does matter in other ways. A bigger IRA means bigger required withdrawals later, which can push you into a higher bracket. Paying the conversion tax from other savings lets more of your money grow tax-free. On the flip side, if the market drops soon after you convert, you’ve paid tax on a higher value, and you can’t undo it. No one can predict returns, which is one more reason we often convert in pieces.

Required withdrawals can push you into higher brackets

Traditional IRAs come with strings attached. Required minimum distributions (RMDs) generally begin at 73. For those born in 1960 or later, the starting age is 75. You generally must take your first RMD by April 1 of the year after you reach your applicable starting age. With a large IRA, those withdrawals can be substantial. The pretax portion is taxed as ordinary income whether you need the cash or not.

Delaying the first RMD until April can put two required distributions in the same calendar year. That can raise your tax bill and affect Medicare premiums. Once RMDs begin, you must satisfy your required distribution before converting additional IRA money. The RMD itself can’t be converted.

Roth IRAs work differently. The IRS doesn’t require you to take any money out of your own Roth while you’re alive. That gives you control. You can leave the money invested for as long as you like.

Watch your Medicare premiums

This one surprises a lot of people. A big conversion raises your income for the year, and higher income can raise your Medicare premiums.

Social Security generally sets these surcharges using your tax return from two years earlier. For 2026, a married couple filing jointly pays more for Medicare Part B and prescription drug coverage once their modified adjusted gross income exceeds $218,000. Those premiums generally reflect 2024 income. A conversion you do at 63 can show up as a higher premium at 65.

A conversion made in 2026 generally affects 2028 premiums, using the thresholds that apply in 2028. Medicare uses a different income measure from taxable income: for this purpose, modified adjusted gross income is generally adjusted gross income plus tax-exempt interest. Staying within a tax bracket doesn’t necessarily keep you below a Medicare threshold.

That doesn’t mean you shouldn’t convert. It means we build the surcharge into the math, the same way we build in your tax bracket.

Crossing a surcharge threshold can still be worthwhile if the expected long-term benefit exceeds the added premiums. The goal is to compare the full cost of converting with the expected cost of leaving the money in a traditional account. Avoiding a surcharge is one consideration, rather than the purpose of the plan.

Think about who inherits the money

For many of our clients, this is the biggest reason to convert. Your IRA may outlive you, and the tax rules for heirs are tough.

Most non-spouse individual beneficiaries, including many adult children, must empty an inherited IRA by December 31 of the tenth year after the owner’s death. Exceptions apply to certain beneficiaries, including people who are disabled or chronically ill and those no more than 10 years younger than the owner. If your children inherit during their peak earning years, taxable withdrawals could add to income already taxed at high rates.

The 10-year deadline isn’t always the only withdrawal requirement. If the owner of a traditional IRA dies on or after the required beginning date, beneficiaries subject to the 10-year rule generally must also take annual distributions during that period. Adult children inheriting Roth IRAs under the 10-year rule generally have no annual distribution requirement before the final year. That can provide more flexibility in deciding when to withdraw the money.

A Roth changes the income-tax treatment. Adult children subject to the 10-year rule generally still must empty an inherited Roth IRA within that period. Their withdrawals are generally tax-free once the owner’s five-tax-year holding period has been satisfied. That period begins January 1 of the first tax year for which the owner funded a Roth IRA. It can finish after the owner’s death. Before it ends, withdrawn earnings may be taxable.

There’s an estate angle too. When you pay the conversion tax from other savings, those assets leave your estate. The federal estate and gift tax basic exclusion is $15 million per person in 2026, before accounting for prior taxable gifts. This potential federal estate-tax benefit matters most for families whose estates would otherwise be taxable. State estate taxes may also matter at lower asset levels.

When a conversion usually makes sense

In our experience, conversions work best when a few things line up. You’re in a lower bracket now than you expect to be later. You can pay the tax from money outside the IRA, so the full amount keeps growing in the Roth. You don’t need to spend the converted money soon. You’d like to leave tax-free money to your children.

Conversions require closer analysis when you’re already in the top bracket and expect future withdrawals to be taxed at the same rate. Estate and inheritance goals may still favor converting. They often make less sense for IRA assets you intend to leave to a tax-exempt charity. Charities generally don’t pay income tax on inherited IRA distributions, so converting those assets may create a tax bill without a corresponding benefit for the charitable beneficiary.

Do it in pieces

Converting doesn’t have to be all or nothing. Many families do partial conversions over several years. Each year, we review your income and decide how much to convert, weighing the cost of crossing a tax bracket or Medicare surcharge threshold.

This approach spreads the tax bill out. It also lets us adjust as tax laws, markets, and your plans change.

The bottom line

A Roth conversion is a trade. You pay tax today to buy tax-free growth and more control later. For the right household, it’s one of the most useful planning tools available. For the wrong one, it’s an expensive mistake you can’t reverse.

If you’re wondering whether a conversion fits your situation, let’s run the numbers together. We’ll look at your brackets, your Medicare costs, and your estate goals before making a call.