Converting your traditional individual retirement arrangement (IRA) or 401(k) account to a Roth IRA often appears to be a clear financial win. Pull some capital from your retirement accounts, pay a little tax upfront, pop it into a Roth IRA and enjoy tax-free growth for the rest of your life. If your investments grow significantly after conversion, you could be saving a pretty penny on taxes. Sounds simple and savvy, right?
A Roth IRA is a retirement savings account where contributions are taxed upfront, but withdrawals are tax-free during retirement. A traditional IRA is the opposite: Contributions are tax-deductible, but withdrawals are taxed as income.
Like all other sophisticated financial maneuvers, the reality of a Roth conversion is nuanced. Your personal circumstances, preferences, and even health concerns can be important factors in your decision. In some cases, the conversion could actually do more harm than good.
So, if you’re thinking about this move in 2026, here are the top five situations that might require you to reconsider.
It should come as no surprise that a Roth conversion involves a tax bill on any untaxed assets that were in a traditional IRA or 401(k). That conversion will be considered income, and could even push you into a higher tax bracket.
An online calculator or a financial advisor could give you an approximation of how big that bill is likely to be. But once you know the amount, you’ll need to decide where the money will come from.
If you have cash set aside to meet the obligation, that’s ideal. But if you need to offload some of the investments from your 401(k) or traditional IRA to pay the taxes, that is considered a distribution, and it’s taxable too — and at a higher rate than you might expect.
Distributions taken before age 59.5 are also subject to an additional 10% early withdrawal penalty from the Internal Revenue Service (1). So if you’re converting a large amount, these penalties and fees could add up to a big hit.
Simply put, your tax bill could be bigger than you expect and the conversion could leave you with less money to invest for the long-term.
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Charitable donations to eligible tax-exempt organizations are tax-deductible. Wealthy retirees often use this deduction to reduce their tax bills in their golden years.
However, keep this in mind: Unlike you, charities won’t have to pay tax on assets withdrawn from a traditional IRA. So if you plan to bequeath or donate your retirement accounts to a good cause, a traditional IRA is likely the better choice to maximize the impact of your gift.
If you convert to a Roth IRA early, you absorb the tax costs. In other words, if you’re a generous person planning to leave a meaningful chunk of your money to charity later in life, plan for that now and avoid a Roth conversion on the amount you intend to give (2).
The basic premise of a Roth conversion is that you pay taxes once, when your balance is relatively low, then leave your money to grow. That way you can take advantage of compounding over years or decades, gaining valuable time in the market and hopefully making back what you paid in taxes, plus much more.
Then you can withdraw that money, tax-free, when you are ready. Unlike traditional IRAs, Roth IRAs don’t have mandatory minimum distributions. You can allow your money to continue to grow well into your retirement years, and even pass on what is left to your children or grandchildren, allowing them to take tax-free withdrawals (3).
However, if your future tax bracket is likely to be lower than your current one, the calculus could change somewhat.
Here’s some quick napkin math: if you have a relatively high income, and were to convert $80,000 to a Roth IRA this year at a federal tax rate of 32%, you would owe around $25,600 in federal taxes. If you withdraw that same $80,000 at a federal tax rate of 22%, because your income is lower, that would cost $17,600. You just paid an $8,000 premium for the right to say “Roth” (4).
So, if you are likely to be in a lower tax bracket in retirement, perhaps because you plan to delay Social Security or won’t have a traditional corporate pension, you will need to have a discussion with your financial advisor about whether the long-term benefits of a Roth conversion will be worth it for you.
Roth conversions pay off over the long term. It could take a few years for your converted assets to appreciate enough to fully offset the tax hit from the conversion. In fact, many financial institutions offer payback period calculators on their websites to help you figure out how long it will take for the maneuver to deliver results for you (5).
With that in mind, if you have a life-limiting illness, started saving at an older age, or expect a shorter life expectancy for whatever reason, converting to a Roth may not be an ideal move for you.
A Roth conversion increases your modified adjusted gross income (MAGI). That can trigger Medicare’s income-related monthly adjustment amount (IRMAA) — a stealth surcharge on Part B and Part D premiums.
For 2026, the Centers for Medicare & Medicaid Services says IRMAA kicks in above $109,000 MAGI (single) and $218,000 (joint) for Part D, with monthly Part D surcharges ranging from $14.50 up to $91.00 (on top of your plan premium) (6). Social Security generally uses two-year-old tax data to set these surcharges — so one “big conversion year” can get you down the line (7).
Bottom line: Roth conversions are often a good idea, but not always.
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Vanguard (1); DAFgiving360 (2); IRS (3); Vanguard (4); Fidelity (5); Centers for Medicare & Medicaid Services (6); Social Security Administration (7)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.