We’ve specialized in Roth conversion planning for more than a decade. In this post we break down a question we get all the time: should you convert 100% of your IRA to a Roth in one year, or spread it over a multi year roth conversions? We’ll walk through the pros and cons of each approach, common misconceptions, and the key factors you must consider to build a smart, personalized plan.
Why Roth Conversions Matter — Especially If You’re an “IRA Millionaire”
When someone has a large pre‑tax IRA balance—what we call an “IRA millionaire”—Roth conversions are one of the most powerful tax planning tools available. The basic idea is simple: pay tax now on pre‑tax IRA money, move it into a Roth IRA, and let that money grow and be withdrawn tax‑free forever.
For our typical client—many with $1M–$2M IRAs—carefully executed Roth conversion plans have enabled lifetime tax savings measured in the millions. For example, our average client profile often shows multi‑million dollar lifetime and intergenerational tax savings without materially eroding after‑tax net worth.
Reasons You’ve Heard Not to Do Roth Conversions (and why they’re often wrong)
- “You’ll push yourself into a higher tax bracket” — true if you convert too much at once, but that alone doesn’t mean conversions are a bad idea.
- “You make too much money” — taxable income limits aren’t a valid reason to avoid conversions; Roth IRAs don’t have an income restriction for conversions.
- “You don’t have money outside the IRA to pay the tax” — this matters, but often we can structure conversions using brokerage assets or charitable strategies to avoid damaging liquidity.
- “Conversions will never make sense for you” — we’ve seen that statement proven wrong in many situations once the full plan is modeled.
Those objections are common, but they’re frequently based on incomplete thinking. We run thousands of conversion game plans and often find that the right strategy is less obvious than a simple “don’t convert” or “convert everything now.”
What Is a Roth Conversion?
A Roth conversion is the taxable transfer of money from a tax‑deferred IRA to a Roth IRA. You pay ordinary income tax on the amount converted in the year of conversion, then future growth and withdrawals (subject to Roth rules) are tax‑free.
The trade‑off is paying tax now versus paying tax later on required minimum distributions (RMDs) and other taxable IRA withdrawals. For large IRAs, RMDs can create very large taxable income events later in life—conversions attempt to eliminate or dramatically reduce that future tax burden.
One‑Year (All at Once) Roth Conversion: Pros and Cons
Pros
- Simplifies tax planning: one taxable event, one year to manage.
- Locks in today’s tax rate: if you believe future rates will be higher, paying taxes now could be attractive.
- Maximizes immediate tax‑free growth: the longer money sits in a Roth, the more tax‑free compounding you get.
- Works for some clients: we’ve had clients where the math clearly showed the all‑at‑once move was best, and it turned out to be the right decision for them.
Cons
- Likely pushes you into your highest marginal tax bracket for the year.
- Can increase Medicare Part B and D premiums due to IRMAA assessment (lookback rule affects premiums for a couple of years).
- May reduce liquidity if you pay taxes from the IRA itself rather than outside assets.
- Often results in lower tax‑adjusted net worth over a lifetime unless specific, relatively rare conditions exist.
We want to emphasize a real example: the first client we walked through a conversion plan had a $1M IRA that grew to $2M. His first RMD was about $80,000 and he didn’t need the money. He chose to write a check—over $600,000—to convert in one go because he wanted the tax problem solved quickly for his wife. That worked for him personally, even though it wasn’t necessarily the mathematically optimal path if every factor had been held constant.
Multi Year Roth Conversions: Pros, Cons, and Common Mistakes
Pros
- Smooths taxable income over several years so you aren’t pushed into the highest brackets all at once.
- Lets converted funds continue to grow tax‑free as you convert, which can help replace taxes paid and maintain or grow net worth during the conversion period.
- Can reduce lifetime Medicare premium costs and IRMAA exposure, sometimes saving tens of thousands in premiums across years.
- Gives flexibility to adapt conversions to market conditions, income events, and life changes.
Cons and pitfalls
- Too slow can be harmful: stretching conversions for too many years leaves large taxable RMDs in later years and reduces overall tax savings.
- Many people make the mistake of simply staying at the top of their current bracket each year and calling it a day—without modeling lifetime Medicare and tax effects. That often underperforms more aggressive, shorter conversion plans.
- Extends the period during which RMDs continue if you are already subject to them (e.g., age 73+), which can increase complexity and future tax exposure.
In our planning, we often see a “sweet spot” that balances converting enough, quickly enough, to remove large future RMDs without needlessly paying extra tax today. The right horizon varies by person, but converting over a shorter period than clients are usually comfortable with tends to be optimal for many IRA millionaires.
Key Factors We Always Consider
Conversions aren’t one‑size‑fits‑all. The following variables must be modeled to make the right call:
- Current and projected taxable income (pensions, wages, consulting income).
- Timing and amount of Social Security benefits.
- Medicare/IRMAA thresholds and the two‑year lookback effect on premiums.
- Charitable giving strategy (QCDs and bunching can offset conversion taxes in early years).
- Available outside funds to pay taxes (brokerage accounts, savings). Using brokerage assets may lower long‑term taxes if those accounts otherwise generate taxable dividends and capital gains.
- Estate goals and inherited IRA considerations—how Roth assets behave for beneficiaries (no future RMDs for owner, but inherited IRAs under the 10‑year rule may change beneficiary taxation).
- Market timing and investment opportunities—if the Roth enables strategies that produce outsized returns, that can change the calculus.
How We Think About the Trade‑Off
Common advice you’ll hear is: “It depends on what you think tax rates will do in the future.” That’s useful but not the primary issue. The real problem Roth conversions solve is the removal of very large future taxable RMDs and the uncertain tax consequences they create for the rest of your life and for your heirs.
In most of the cases we analyze, converting sooner (and over a shorter timeframe than clients prefer) yields better lifetime, tax‑adjusted outcomes than doing nothing or stretching conversions out at the edge of a current tax bracket. But we never recommend one path blindly—detailed, scenario‑based modeling is essential.
Conclusion — What We Recommend
Roth conversions can be extremely powerful for individuals with large IRAs. We believe many IRA millionaires should be aggressively pursuing conversions, but the exact tempo—one year, a few years, or longer—must be personalized.
If you fall into the “IRA millionaire” bucket and you’re not paying a lot of your IRA out today to live on, it’s very likely conversions will help you materially. That said, the path that minimizes taxes, Medicare impacts, and supports your estate goals requires careful planning and modeling.
FAQ
Should we convert everything at once?
Sometimes yes, sometimes no. Converting everything in one year simplifies planning and maximizes tax‑free growth, but it typically pushes you into your highest marginal tax bracket and may increase Medicare premiums for a couple of years. We analyze cash needs, IRMAA impact, and lifetime tax effects before recommending an all‑at‑once conversion.
What if we don’t have outside money to pay the tax?
Paying taxes from outside assets is ideal because it preserves IRA principal. If outside funds aren’t available, we look at the overall portfolio—selling from a taxable brokerage account can be beneficial because it reduces future taxable dividend/capital gains income and keeps liquidity. There are also charitable strategies that can offset early conversion taxes.
How do Medicare premiums get affected?
Medicare Part B and D premiums are based on a two‑year lookback of your modified adjusted gross income. A large conversion will raise those premiums for a short period (typically a couple years), so we always model IRMAA impact as part of the decision.
Will conversions reduce our lifetime tax bill?
In many cases yes—especially for those with large IRAs. Conversions reduce future taxable RMDs and can dramatically lower lifetime and intergenerational taxes. But the exact savings depends on timing, conversion size, and other income streams.
Does market timing matter?
Market conditions can affect the decision—converting after a market drop lets you pay tax on a lower basis, which can be advantageous. Conversely, converting earlier gives Roth money more time to grow tax‑free. We factor market expectations into the plan but don’t rely on market timing alone.
How should we get started?
Build a game plan. Run scenario modeling that includes income projections, Medicare premium effects, charitable strategies, and estate goals. We recommend working with an experienced CFP® or tax professional who has done hundreds or thousands of Roth conversion plans rather than making a one‑off decision without modeling.
Final Thoughts
Roth conversions are not a one‑size‑fits‑all decision. For many high‑net‑worth retirees with large IRAs, converting aggressively—over a shorter timeframe than they feel comfortable with—is often the right choice to protect both their lifetime and inherited tax positions. But the devil is in the details, and careful planning is non‑negotiable.
If you want to dive deeper or run personalized scenarios, we recommend building a detailed conversion game plan that accounts for income timing, Medicare, charitable goals, and estate planning priorities.
“We’ve learned from thousands of plans: converting sooner, and over a condensed timeframe, often produces the best tax‑adjusted outcomes for IRA millionaires—when the plan is modeled correctly.”
