For many nearing retirement, few questions spark as much curiosity (or confusion) as when to convert to a Roth IRA. You might already understand the why: Roth IRAs offer tax-free growth and tax-free withdrawals in retirement. You might even understand the how: you pay income tax now on the converted amount, moving funds from your traditional IRA into a Roth.
But the question that often matters most is when. Should you make the conversion early in the year to maximize growth potential? Wait until year-end when you have a clearer tax picture? Or try to time it with a market dip?
Like most things in wealth management, the answer isn’t about a single perfect moment. It’s about aligning timing with strategy.
Why Timing Matters
A Roth conversion is ultimately a tax play. The value lies in paying taxes at a lower rate today than you would later in retirement. That means timing your conversion isn’t just about what the markets are doing but about what you are doing financially.
Consider this: if you’re still earning a strong income from your career or business, a conversion this year might push you into a higher tax bracket. But if you’re approaching retirement and your income will soon decline, waiting a year or two could mean a smaller tax bill on the same converted dollars.
Think of timing a Roth conversion less like trying to “buy low” in the market, and more like finding the sweet spot in your personal income cycle.
The Market Timing Myth
It’s tempting to think a market drop is the ideal moment to convert. After all, if your portfolio temporarily dips, you’re converting shares at a lower value, potentially setting yourself up for more tax-free growth as markets recover.
There’s some truth to that but only if the rest of your financial picture supports it. A market downturn doesn’t automatically make a Roth conversion smart. The tax rate you’ll pay today still determines whether that growth actually benefits you later.
In other words, the market can create opportunity, but taxes still drive the outcome.
Early-Year vs. Late-Year Conversions
Many investors like the idea of converting early in the year. It gives more time for growth inside the Roth and maximizes the period for tax-free compounding. That’s an appealing advantage, especially if you’re optimistic about the year’s market performance.
But early conversions come with a catch: uncertainty. Midyear surprises like bonuses, capital gains, or unexpected income can bump you into a higher tax bracket. Even positive life changes like selling a business, taking a consulting role, or receiving an inheritance can alter your tax outlook.
That’s why many advisors recommend waiting until late in the year to finalize conversions. By then, you have a much clearer picture of your total income, deductions, and tax exposure. You can fine-tune the amount you convert to stay within your target bracket, avoiding the unpleasant surprise of a larger-than-expected tax bill.
Splitting the Difference
Of course, timing doesn’t have to be all or nothing. Some investors take a hybrid approach, converting part of their traditional IRA early and reserving the option to convert more later.
For example, if you expect to retire at the end of the year, you might convert a smaller amount in spring, then reassess in fall when you know your income more precisely. This strategy offers flexibility and allows you to adapt as the year unfolds.
After all, flexibility is one of the great advantages of a Roth conversion. You’re not limited to one transaction; you can structure conversions across several months or even several years to smooth out taxes and balance opportunity with prudence.
The Strategic Lens
Ultimately, the “right” time to convert isn’t about predicting markets or reacting to short-term events. It’s about aligning your conversion strategy with your overall financial plan, including your tax outlook, income trajectory, retirement goals, and legacy intentions.
At Legacy Wealth Management, we often find that the best outcomes come from long-term coordination, not one-off decisions. For many of our clients, conversions are part of a broader strategy to manage tax brackets in retirement, preserve wealth for heirs, and ensure that every dollar is working efficiently both today and for tomorrow.
The key takeaway: don’t let timing anxiety delay a decision that could serve you well in the years ahead. The best “when” is the one that fits into your life’s financial rhythm, and that’s a conversation worth having with a fiduciary partner who knows your full story. Schedule a chat with Legacy Wealth Management today to explore how thoughtful tax planning can help you keep more of what you’ve worked hard to build.
