Is a Roth Conversion Right for You?
March 24, 2025
By Andi McNamara, CFP®
Vice President, Director of Financial Planning
Washington Trust Wealth Management
If you have a Traditional IRA, you may be wondering whether converting to a Roth IRA makes sense for you. A Roth IRA conversion can be a smart financial move, but it’s not the right choice for everyone.
Roth Conversion Advantages
- Tax-free growth and withdrawals. Once your money is in a Roth IRA, it grows tax-free, and qualified withdrawals in retirement are completely tax-free.
- No required minimum distributions (RMDs). Unlike a Traditional IRA, a Roth IRA doesn’t require you to start taking withdrawals at age 73, which allows your money to continue to grow for as long as you like.
- Inheritance benefits for your heirs. A Roth IRA lets you leave tax-free income to your heirs.
- Protection against future tax increases. If you expect tax rates to rise, paying taxes now at today’s rates may save you money in the long run.
- Flexibility in retirement. Since Roth withdrawals don’t count as taxable income, they can help you manage your tax bracket and avoid triggering higher Medicare premiumsi or Social Security taxes.
Roth Conversion Disadvantages
- Immediate tax bill. Converting a Traditional IRA to a Roth IRA requires you to pay income tax on the converted amount in the year of conversion.
- Long-term horizon required. If you plan to withdraw the money soon, a Roth conversion might not provide enough time to make up for the taxes paid upfront and will reduce the tax-free income benefit for your heirs.
- Five-year rule. Withdrawals of converted funds within five years of the conversion may be subject to penalties and taxesii.
Who Is a Good Candidate for a Roth Conversion?
- You have cash available to pay the conversion taxes without using IRA funds.
- You want to leave an income tax-free inheritance to heirs.
- You want to reduce RMDs in the future.
- You have a long investment horizon, allowing tax-free growth to compound, and are not planning to use the funds for at least five years.
Who May Want to Avoid a Roth Conversion?
- You would need to use IRA funds to pay the conversion taxes or realize capital gains to raise the cash to pay the additional income taxes.
- You plan to withdraw the money soon, making the upfront tax payment less worthwhile.
Volatile Markets May Help
One of the best times to convert to a Roth IRA is during a market downturn. If your IRA’s value has dropped, converting while prices are lower means you’ll own more shares in your Roth IRA once the market rebounds. A rebound after your conversion means all future gains are tax-free.
Is a Roth conversion right for you?
Washington Trust Wealth Management Can Help
A Roth conversion can be a powerful strategy, but it’s not one-size-fits-all. Your wealth advisors at Washington Trust Wealth Management can guide you through the process, evaluating your current and future tax situation, cash flow, and long-term financial goals to help you determine whether a Roth conversion is the right move for you.
i https://www.cms.gov/newsroom/fact-sheets/2025-medicare-parts-b-premiums-and-deductibles
ii https://www.irs.gov/publications/p590b
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