Roth Conversion: Is it Right for You in 2025?

If you’re thinking about long-term tax planning, you’ve probably heard about Roth conversions but is 2025 the right time to make your move?

A Roth conversion lets you move money from a Traditional IRA or 401(k) into a Roth account, trading upfront taxes for future tax-free withdrawals. It’s a powerful strategy, but it’s not for everyone.

This guide breaks down when a Roth conversion makes sense, what to watch out for, and how to weigh the trade-offs.

What Is a Roth Conversion?

A Roth conversion is the process of transferring funds from a pre-tax retirement account like a Traditional IRA or 401(k)—into a Roth IRA. You’ll pay ordinary income taxes on the amount you convert, but once inside the Roth IRA, your money grows tax-free, and qualified withdrawals are tax-free, too.

Quick Example:

Convert $50,000 from a Traditional IRA in 2025
Pay income taxes on that $50,000 now
Let it grow tax-free forever (assuming you meet holding rules)

Why 2025 Might Be the Perfect Time

Several trends make 2025 an attractive year for Roth conversions:

Tax rates are still relatively low: The 2017 Tax Cuts and Jobs Act expires in 2026. That means higher tax brackets are likely in 2026 and beyond—converting in 2025 may lock in lower rates.
Market volatility: If markets dip, converting while your portfolio is temporarily down means a smaller tax hit and bigger future gains (tax-free).
Income dips: Retired early? In between jobs? A lower-income year creates a tax-efficient window to convert without jumping tax brackets.

Pros and Cons of a Roth Conversion

Pros:

Tax-free growth & withdrawals in retirement
No required minimum distributions (RMDs) from Roth IRAs
Potentially lower overall lifetime tax burden
Beneficial for estate planning—heirs pay no income tax

Cons:

You pay taxes now, possibly a large sum
May push you into a higher tax bracket for the year
Can affect Medicare premiums and ACA subsidies
Once done, can’t be undone (recharacterization was eliminated in 2018)

Who Should Consider a Roth Conversion in 2025?

Good Candidates:

People expecting higher income/tax rates in retirement
Early retirees in a temporary low-income window
Those with large pre-tax balances and a long investment horizon
Individuals who want to reduce RMDs in their 70s
Those doing estate planning for heirs in higher tax brackets

Not Ideal For:

People already in the highest tax brackets
Those without cash on hand to pay conversion taxes
Investors close to retirement with shorter time horizons

How Much Should You Convert?

You don’t have to convert everything. In fact, many people do partial conversions, often up to the top of their current tax bracket.

Here’s a simplified 2025 federal tax bracket for single filers:

Tax Bracket	Income Range
12%	$11,601 – $47,150
22%	$47,151 – $100,525
24%	$100,526 – $191,950

You can calculate how much to convert without pushing into a higher bracket. This helps manage your tax liability year by year.

Long-Term Tax Savings: A Hypothetical Case Study

Scenario A: No Conversion

$200,000 in Traditional IRA
6% annual growth for 20 years
Withdrawn at 25% tax rate:
Final after-tax: ~$461,000

Scenario B: Convert Now (24% rate)

Pay $48,000 tax on conversion
Same growth, no future taxes
Final after-tax: ~$614,000

Difference: Over $150,000 saved, just by paying taxes earlier at a lower rate.

Watch Out for These Tax Pitfalls

Medicare IRMAA: Higher income from a conversion can raise Part B and D premiums.
ACA subsidies: If you’re under 65 and using the marketplace, extra income may reduce or eliminate subsidies.
Tax withholding: Don’t withhold taxes from the conversion itself it reduces the amount that can grow tax-free. Use cash if possible.

Tips for a Smart Roth Conversion

Do it early in the year to allow growth and handle tax planning
Work with a tax pro to model different scenarios
Use a Roth conversion ladder over several years to stay in lower brackets
Track tax forms: You’ll need Form 1099-R and Form 8606 at tax time

Final Word: Is a Roth Conversion Right for You?

If you’re in a relatively low tax bracket, have room before crossing into a higher one, or want to minimize future RMDs, 2025 could be a strategic year to convert. But the decision requires clear financial planning, especially around taxes.

You don’t have to go all-in a partial conversion each year might be the most tax-efficient route.

Next up: Ready to spend from your Roth account? Learn how to do it wisely with
Tax-Efficient Withdrawal Strategies After Roth Conversion