GOOD MORNING.

Sunday is a good day to talk about something that affects retirement accounts directly but does not make the daily headlines. It is a strategy called a Roth conversion, and depending on your situation, it may be one of the most powerful tax planning moves available to retirees right now.

Here is the basic idea. A traditional IRA or 401(k) is funded with pre-tax dollars. You get a tax break when you put the money in, but you owe income taxes on every dollar you pull out in retirement. A Roth IRA works the opposite way: you pay taxes on the money before it goes in, but everything that comes out in retirement, including all the growth, is completely tax-free.

A Roth conversion means moving money from a traditional account to a Roth account. You pay income taxes on the converted amount in the year you do it, and then that money grows tax-free from that point forward.

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Why would anyone want to pay taxes now? There are several reasons that make particular sense right now.

First, taxes. The Tax Cuts and Jobs Act of 2017 lowered income tax rates across the board, and many of those lower rates are scheduled to expire at the end of 2025. Congress can always change that timeline, but the possibility that tax rates rise in the future makes paying taxes today at the current rates look more attractive. If your rate goes up later, you will have locked in a lower tax bill by converting now.

Second, required minimum distributions. Once you turn 73, the IRS requires you to pull a minimum amount out of your traditional IRA each year, whether you need it or not. Those withdrawals are taxable income and can push you into a higher bracket, increase your Medicare premiums, and make more of your Social Security benefit taxable. Converting some traditional IRA funds to Roth before you hit 73 reduces the size of those future mandatory withdrawals.

Third, the gap years. Many retirees have a window between when they stop working and when they start taking Social Security. During those years, taxable income is often at its lowest point in decades. That window is often the ideal time to convert, because you can fill up lower tax brackets at a low cost without other income pushing you higher.

Fourth, leaving a tax-free inheritance. If you have children or grandchildren who will inherit your IRA, a Roth is far more favorable. Under current rules, they must withdraw inherited traditional IRA funds within 10 years, which could push them into higher brackets during their peak earning years. A Roth inheritance is tax-free to them.

The math behind a conversion can get complicated quickly, and it interacts with Medicare premiums, capital gains rates, and state taxes. This is genuinely one of those decisions where sitting down with a qualified tax advisor or financial planner pays for itself many times over. But understanding the basic concept puts you in a much better position to ask the right questions.

Many retirees are surprised to discover that their Medicare premiums can increase significantly based on their income. The surcharge is called IRMAA, which stands for Income-Related Monthly Adjustment Amount. In 2026, single filers with income above $106,000 pay a higher Medicare Part B premium, and the surcharges increase at each income level above that. A large Roth conversion, or a big RMD, can push income across one of those thresholds and cost a couple several thousand dollars per year in extra Medicare premiums. This does not mean avoiding conversions. It means sizing them carefully each year to stay within brackets that work for your situation. A good advisor or CPA can model this out for you before year-end.

One underappreciated consequence of large taxable withdrawals in retirement is the effect on Social Security. Depending on your total income, between 50% and 85% of your Social Security benefit becomes taxable. The thresholds are set in law and have not been adjusted for inflation since 1983, which means more retirees hit them each year. For a married couple, the 85% threshold begins at combined income of $44,000, which is not a high bar in an era of larger retirement accounts and higher interest income. Roth conversions done strategically before you claim Social Security can reduce the taxable income that triggers this, effectively making more of your Social Security benefit tax-free over time.

The SECURE Act of 2019 changed the rules for inheriting IRAs in a way that made Roth accounts significantly more valuable as an inheritance. Under the old rules, heirs could stretch withdrawals from an inherited IRA over their own lifetime. Now, most non-spouse heirs must withdraw everything from an inherited traditional IRA within 10 years. For a child or grandchild in their 40s or 50s, that often means withdrawing during their highest-earning years at their highest tax rates. A Roth IRA, by contrast, is inherited tax-free. While they still must empty it within 10 years under current rules, every dollar comes out without any federal income tax owed. Converting traditional IRA funds to Roth over time, especially when your own tax rate is relatively low, is one of the most direct ways to pass wealth efficiently to the next generation.