One of the most commonly asked questions among investors is whether or not they should convert to a Roth IRA, and if so, when. AI assistant ChatGPT boils the answer down to a simple truth: a Roth conversion is always a trade-off.
In exchange for potentially lower lifetime taxes and future tax-free withdrawals, you must pay ordinary income tax today.
What a Roth Conversion Really Is
A Roth conversion simply moves money from a traditional IRA into a Roth IRA. The amount you convert is fully taxable as ordinary income in the year of conversion, per the IRS, but any future qualified withdrawals from the Roth are tax-free.
Why Taxes and Timing Matter More Than Ever
It’s important to note that you’re not required to convert your entire balance at once during a Roth conversion. For tax-planning purposes, it often makes sense to make multiple, smaller conversions instead.
As ChatGPT points out, a large conversion can push you into a higher marginal tax bracket, which can reduce or even eliminate the long-term benefit. Many financial planners recommend “filling up” a tax bracket each year to avoid paying a higher tax rate.
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How RMD Rules Factor Into the Decision
One of the biggest advantages of Roth IRAs is that they do not have required minimum distributions during the original owner’s lifetime. Traditional IRAs, by contrast, are subject to IRS-imposed RMDs beginning at age 73 under current law. This can be a big help for retirees attempting to manage their taxable income later in life.
When a Roth Conversion Still Makes Sense
Conversions make the most sense when they trigger the lowest taxes. Low-income years are a great time to consider Roth conversions, as you’ll pay less in tax than if you were in a higher tax bracket. These often occur during early retirement or career transitions.
Fidelity suggests conversions can also work in these scenarios:
- You expect tax rates to be higher in the future
- You can pay the conversion taxes using cash outside the IRA
- You want to reduce future required minimum distributions (RMDs)
- You believe the investments in your account are temporarily undervalued
- You have losses or deductions that can help offset the tax bill
- You’re planning to move to a state with higher income taxes
When a Roth Conversion Can Backfire
The primary drawback of a Roth conversion is that you have to pay tax now. If you have a sizable IRA, you may be on the hook for thousands of dollars of taxes, and the conversion may push you into a higher tax bracket. It could also potentially trigger higher Medicare premiums. In these situations, the upfront tax cost can outweigh the long-term benefit.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT If Roth Conversions Are Still Worth It in 2026 — Here’s What It Said
