Roth Conversions are a game changer for many, but there are pitfalls to watch out for.

Creating Roth assets is more advantageous than ever.  There’s a lot of talk about where tax rates are headed in future years, and most believe the answer is up.  Roth IRA assets side-step this risk entirely since qualified withdrawals are tax-free.  There’s also no requirement to take Roth-IRA withdrawals during your lifetime, so Roth assets are a terrific way to build a tax-free inheritance for your loved ones.


Even if you can’t contribute to a Roth-IRA, you can convert traditional IRA assets into a Roth-IRA.  Many people think that because they earn too much income to contribute to a Roth-IRA, they cannot build tax-free wealth.  Fortunately, anyone with traditional IRA assets has the ability to convert some or all of those assets into a Roth IRA, regardless of income.


As advantageous as Roth conversions can be, there are pitfalls to watch out for.  The value of assets converted to a Roth IRA are added to your income for tax purposes in the year of the conversion.  Converting too much in a given year can result in unintended outcomes such as:

  • Elevating you into higher tax brackets.
  • Reducing or eliminating a wide variety of tax deductions and credits.
  • Triggering penalties like the net investment income tax.
  • Increasing the amount of Social Security income subject to taxation.
  • Raising your Medicare premiums.


Knowing when to convert and how much to convert requires professional guidance.  Deciding when and how much to convert to a Roth IRA by guesswork is a bit like performing surgery while blindfolded – not recommended.  If the whole point of a Roth conversion is to save on taxes, going it alone can have the opposite effect. We highly recommend consulting with a tax professional and a financial advisor before making any Roth conversions.


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