“Do a Roth conversion.”
It’s one of the most common recommendations investors hear from advisors, CPAs, podcasts, and financial articles.
And for many people, it can be excellent advice.
But here’s the question every client should ask:
Why?
A Roth conversion isn’t valuable simply because someone recommends it. It’s valuable only if it makes sense for your financial situation.
Without context, a Roth conversion is just another transaction.
With context, it becomes part of a long-term tax strategy.
For one investor, converting money today may reduce future Required Minimum Distributions (RMDs), allow assets to grow tax-free, create greater flexibility in retirement, and leave heirs with more tax-efficient assets.
For another investor, the exact same recommendation could create unnecessary taxes today, increase Medicare premiums, reduce valuable tax benefits, or simply convert more than necessary.
Same strategy. Completely different outcome.
That’s why financial planning isn’t about collecting strategies. It’s about understanding when a strategy creates value—and when it doesn’t.
Someone saying, “Just do a Roth conversion,” is only part of the conversation.
The real questions are: How much should you convert? When should you convert it?
Looking Beyond This Year’s Tax Return
Consider this example.
A married couple, both age 67, has a Modified Adjusted Gross Income (MAGI) of $215,000.
Their advisor recommends a $20,000 Roth conversion to up to the 24% federal tax bracket.
At first glance, that seems like good tax planning.
Medicare premiums are based on your income from two years earlier. That additional $20,000 conversion increases their MAGI to $235,000, pushing them above the $218,000 IRMAA threshold.
The result? Approximately $2,297 per year in additional Medicare premiums for the couple.
The Roth conversion may have saved roughly $4,800 in federal income taxes, yet nearly half of that benefit was offset by Medicare surcharges that didn’t appear until two years later.
Was the Roth conversion wrong? Not necessarily. But the planning around it may have been incomplete. That’s the difference between implementing a strategy and coordinating a financial plan.
The Questions That Matter
Before recommending a Roth conversion, we want to understand much more than your current tax return.
- What tax bracket are you in today?
- What tax bracket are you likely to be in during retirement?
- What Required Minimum Distributions look like for you?
- How much Social Security income will you receive?
- Will you have pension income?
- Will a Roth conversion affect Medicare premiums?
- Do you have large taxable brokerage assets?
- What other sources of taxable income are expected over the next several years?
Then we ask a question that often surprises people: Where are your children financially?
Are they just beginning their careers and in relatively low tax brackets? Or are they in their peak earning years, already paying taxes at 32%, 35%, or even 37%?
Many people respond, “I’m not worried about leaving an inheritance.”
That’s perfectly fine. But regardless of whether leaving an inheritance is one of your goals, we still want to understand where your assets are likely to end up.
If there’s a reasonable chance your retirement accounts will eventually pass to your children or other heirs, their future tax situation becomes part of today’s planning discussion.
Because after the SECURE Act 2.0, most non-spouse beneficiaries generally must distribute inherited retirement accounts within ten years. If your children inherit large pre-tax retirement accounts during their highest earning years, those distributions could be taxed at significantly higher rates than you might pay today through carefully planned Roth conversions.
Sometimes paying taxes at your 22% or 24% marginal tax rate today may produce a better long-term family outcome than leaving your children to pay 32%, 35%, or even 37% on those same dollars years from now.
That doesn’t mean everyone should aggressively convert their retirement accounts. It means those future tax consequences deserve a seat at the planning table.
Planning Isn’t About One Transaction
The objective isn’t simply to convert money from one account to another.
The objective is to convert the right amount, at the right time, for the right reasons.
Sometimes that’s $10,000. Sometimes it’s $100,000. Sometimes the best answer is not converting anything at all.
That’s why comprehensive financial planning looks beyond this year’s tax return. It considers your retirement timeline, projected income, future tax brackets, Medicare costs, Required Minimum Distributions, estate considerations, and the people who may eventually inherit what’s left.
A Roth conversion should never be viewed as an isolated recommendation. It should fit into the broader story of your financial life.
It’s Bigger Than Roth Conversions
This same principle applies throughout financial planning.
Someone tells you to delay Social Security. Why?
Someone recommends paying off your mortgage early. Why?
Someone suggests increasing your international allocation. Why?
Every recommendation should connect directly to your goals, your taxes, your cash flow, your retirement timeline, and your family’s overall financial picture.
If an advisor can’t clearly explain why a recommendation benefits you—not just in theory, but in your specific situation—it’s reasonable to ask more questions.
Good financial planning isn’t measured by how many strategies are implemented. It’s measured by whether those strategies improve your life.
The best advisors don’t simply tell clients what to do. They help clients understand why they’re doing it.
Because when you understand the “why,” you’re far more likely to have confidence in the plan—and stick with it when life inevitably changes.
