Roth Conversions Before Year-End: Three Situations and the Questions Each One Raises

A Roth conversion is taxed in the year it happens, so the calendar shapes the decision as much as the account balance does.

Every fall, the same question comes up: should some of this traditional IRA be converted before December 31, or should the decision wait another year? The answer depends far less on the definition of a conversion than on where a household sits in its own timeline, including how much income it has now, how much it expects later, and what else is on the return.

The profiles below are fictional and meant to show how different the questions can look from one stage of life to the next. None of them is a recommendation, and none predicts an outcome.

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The Mechanics That Apply in Every Situation

A few rules hold regardless of age or income. The IRS states that a conversion results in taxation of any untaxed amounts in the traditional IRA, and the conversion is reported on the return for the year it occurs. That is why the December 31 date carries weight: an amount converted on December 30 lands on this year's return, while the same amount converted in January lands on next year's.

Conversions made after 2017 cannot be recharacterized, which means a conversion cannot be undone if the tax bill turns out larger than expected. The decision is final once it is made, so the size of the conversion deserves as much thought as the choice to convert at all.

If a person holds both pre-tax and after-tax (basis) dollars across traditional IRAs, the taxable share of a conversion is figured using the combined year-end value of all traditional IRAs. That pro rata calculation appears on Form 8606, and it can change the result for anyone who has made nondeductible contributions in the past.

Required minimum distributions add one more consideration. The IRS says RMD amounts are not eligible for rollover, and a conversion is a form of rollover, so the required distribution for the year is generally taken as ordinary income before additional amounts are converted. Anyone in that position should confirm the sequence with a tax professional.

Three Situations Worth Understanding

The pre-retiree at 62, bridging to Social Security

Consider Janet, a fictional 62-year-old who has stopped full-time employment and plans to delay Social Security. For the next several years, her taxable income may be lower than it was during her career and lower than it may be once benefits and required distributions begin.

That gap is where a partial conversion tends to enter the conversation. The questions are specific: how much room exists in her current tax bracket, where will the tax come from (a taxable account, or the converted amount itself), and how does a larger income year interact with health insurance costs before Medicare begins? Because she is under 59½, she would also want to understand how early-withdrawal rules apply to converted money before she touches it, a point to confirm with a tax professional.

The retiree in the years before RMDs

Walter and Pat, a fictional couple in their late 60s, are retired and living from taxable savings, with large traditional IRAs and Social Security still ahead or newly started. Required distributions begin at age 73 under the current IRS guidance, which leaves a window of years in which they control how much taxable income they report.

Their questions center on the Medicare connection. The Social Security Administration generally uses the tax return from two years earlier to set income-related Medicare premiums, so for 2026 premiums it uses the 2024 return. The surcharges start above $218,000 of modified adjusted gross income for married couples filing jointly and $109,000 for other filers. A conversion year that raises income can therefore show up in premiums two years later, and it is worth knowing that SSA lets people request a reconsideration after certain life-changing events, such as retirement, using Form SSA-44.

The 50-year-old high earner weighing a partial conversion

Marcus, a fictional 50-year-old, earns a high salary and expects his income to stay high for years. A conversion adds to his taxable income at what may be a high marginal rate today, so the trade-off is different from the other two profiles.

His questions might include whether some years of lower income are likely ahead, such as a sabbatical, a business sale, or an early retirement. They might also include whether he has the cash to pay tax without drawing on the converted funds, and whether a smaller conversion in a lower-income year would be easier to absorb than a larger one now. For someone in his position, the case for waiting can be as reasonable as the case for acting.

A Short List to Bring to the Conversation

Before year-end, it helps to gather a few facts: your projected taxable income for this year, the balance and tax basis in each traditional IRA, the account you would use to pay any resulting tax, and your expected Medicare timing. With those in hand, the discussion with an advisor and a tax professional can focus on amounts and timing rather than on generalities.

Which of These Situations Looks Most Like Yours?

The December 31 deadline is a useful prompt, though it is rarely the only factor. If one of these profiles resembles your own, a conversation about your income across the next several years can clarify whether a conversion belongs in your plan, and how large it might reasonably be.

Schedule a complimentary consultation with Ben Loughery.

This article is educational and does not constitute tax, legal, or investment advice. Examples are hypothetical and do not represent actual clients or predict results. Individual circumstances differ, so consult a qualified tax professional before acting.

Ben Loughery is a CERTIFIED FINANCIAL PLANNER® and founder of Lock Wealth Management, based in Atlanta, GA. He specializes in retirement income planning, tax optimization, and helping clients build financial confidence at every stage of life.