The Roth conversion window closes December 31. Is this your year?
If you watched television in the 1970s, you may remember the oil filter commercial. A mechanic in work clothes stands beside a car, holds up a filter, and tells you that you can pay him now or pay him later. Now, you paid a few dollars for a filter. Later you paid for the engine.
It worked because everyone got it immediately. Some costs don't go away when you put them off. They wait.
A traditional IRA works a lot like that. You got a deduction or a tax deferral when the money went in, and the tax bill is still sitting there for the day you take it out. A Roth conversion is the choice to pay some of that bill now, on your timing, so the money can grow and come out later without tax.
Here's where the oil filter analogy breaks down. Paying now isn't automatically the smart move. Sometimes later really is cheaper. That's why we don't treat a Roth conversion as a yes or no question. It's a question about this year.
What a conversion does
When you convert, you move money from a traditional IRA (or a pre-tax 401(k), if your plan allows it) into a Roth IRA. The amount you convert is added to your taxable income for the year. After that, it grows tax free, qualified withdrawals come out tax free, and a Roth IRA has no required minimum distributions during your lifetime.
Two rules matter right now. A conversion counts in the calendar year it's completed, so a 2026 conversion must be finished by December 31. There's no April grace period the way there is for contributions. And a conversion can't be undone. Since 2018 the IRS hasn't allowed anyone to reverse one after the fact, so it's worth a careful look before you make it.
Signs this may be your year
The case for converting is strongest when your tax rate this year is lower than the rate you expect to pay later. That tends to happen in a few recognizable situations.
A year with less income than usual. A layoff, a sabbatical, a slow year in a business, or the first year after you stop working.
The years between retirement and required distributions. For most people today, required minimum distributions begin at 73, and at 75 for anyone born in 1960 or later. The years before that are often the lowest income years a retiree will have.
An account you expect to leave to your children. Most children who inherit an IRA now must empty it within 10 years, often during their own peak earning years. Inherited Roth money follows the same 10-year timeline, but it generally comes out tax free.
Room left in a lower bracket. Converting just enough to fill a bracket, year after year, is often how this works in practice, rather than converting everything at once.
Reasons to slow down
A conversion that looks good on a spreadsheet can still be the wrong call. The tax is due this year, and paying it from the IRA itself leaves less money working in the Roth (and if you're under 59 and a half, the amount withheld can be hit with a 10 percent penalty). The added income can raise your Medicare premiums, which are based on your income from two years earlier, so a 2026 conversion can show up in your 2028 premiums. It can also change how much your Social Security is taxed and whether you qualify for income-based credits and deductions. And if you're under 59 and a half and may need the money soon, each conversion starts its own five-year clock before the converted amount can come out penalty free.
The question underneath the math
Every conversation about conversion eventually comes back to one question. Who is this money for, and when will they use it?
For some families the answer is their own retirement, decades out, and paying tax today buys flexibility later. For others, it's the children who will inherit the account, and a conversion is a way to take a tax bill off their plate. And for some, it's this year, and holding off is the right decision. We'll run the numbers either way. The numbers tell you what a conversion costs, while your values tell you whether it's worth it.
The mechanic was right that some bills don't go away. He didn't mention that you often get to choose when to pay them, as long as you choose before the window closes.
Our Roth Conversion Window Guide walks through the questions we work through before recommending a conversion. It's free to download.
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