Here are a few hypothetical examples illustrating how Roth conversion decisions can vary depending on an investor’s circumstances. These examples are for educational purposes only and do not represent actual clients or actual investment outcomes.

Roth conversions have become one of those strategies everyone seems to talk about like it’s automatically the right move. Pay taxes now, avoid taxes later, tax-free growth, no RMDs. Sounds easy enough.

However, like most things in financial planning, the answer is usually: it depends.

Sometimes Roth conversions are incredibly powerful. Other times, they create unnecessary taxes, Medicare surcharges, or cash flow strain that clients don’t fully see coming until after the fact.

That’s why I think the conversation needs more nuance.

At Members’ Wealth, we don’t look at Roth conversions as a standalone tactic. We look at them through the lens of the entire plan: cash flow, tax brackets, retirement timing, estate goals, Medicare, charitable giving, and liquidity. Sometimes the answer is “absolutely.” Sometimes it’s “not yet.” And sometimes it’s “leave it alone.”

Here’s how that plays out in real life.

Julie: Just Because You Can Convert Doesn’t Mean You Should

Julie is in her early 50s, still working, and earning a very high income between salary, bonuses, RSUs, and investment income. She’s exactly the type of person who reads an article about Roth conversions and thinks, “I should probably be doing this immediately.”

Maybe. Maybe not.

The issue is that Julie is already sitting in a very high federal and state tax bracket. Forcing large conversions now could mean voluntarily paying taxes at some of the highest rates she may ever face. That doesn’t automatically make sense just because Roth accounts sound attractive.

Instead, we’re looking ahead. What happens when she retires? What happens if income drops before Social Security starts? What happens if markets pull back temporarily and IRA values decline? Those windows may create more favorable planning opportunities. For Julie, the strategy is less about rushing and more about patience and timing.

That’s the part people miss. Good planning isn’t about doing everything now. It’s about doing the right thing at the right time.

Drew: The Gap Years Might Be the Sweet Spot

Drew retired early at 55. This is where Roth conversions can get really interesting.

His income dropped substantially once he stopped working, but he hasn’t started Social Security yet and RMDs are still years away. We call this the “gap year” window, and for some retirees, it can create a meaningful tax-planning opportunity for some retirees.

The key question for Drew isn’t: “Should we do Roth conversions?”

The real question is: “How much should we convert before the math stops making sense?”

Because there is a breakeven point.

If Drew converts too aggressively, he could unnecessarily jump brackets today. If he converts too little, future RMDs may become a major tax problem later. So instead of guessing, we model it.

We look at:

• projected RMDs,
• future tax brackets,
• portfolio growth,
• life expectancy,
• estate goals,
• Medicare costs later in retirement,
• and whether the taxes paid today are likely to save more taxes tomorrow.

Sometimes the answer is converting enough each year to “fill up” a bracket without spilling into the next one. Sometimes it means stopping just short of an IRMAA threshold years before Medicare even starts.

This is where working closely with a CPA matters enormously. A Roth conversion isn’t just an investment move. It’s a tax projection exercise.

For Drew, thoughtful annual conversions over a decade may save substantially more than one giant conversion done all at once.

In many situations, a gradual and carefully modeled approach may be more appropriate than aggressive conversion strategies.

Blake: Where IRMAA and Cash Flow Complicate Everything

Blake retired closer to Full Retirement Age. He’s already collecting Social Security, Medicare is either active or right around the corner, and now Roth conversions become much more delicate.

This is where people can accidentally create problems while trying to solve one.

Every dollar converted increases taxable income. That can impact:

• taxation of Social Security benefits,
• Medicare Part B and Part D premiums,
• capital gains exposure,
• and overall retirement cash flow.

The IRMAA issue is the one many people overlook.

A large conversion might technically reduce future RMDs, but if it triggers years of higher Medicare premiums, the benefit may shrink quickly.

For Blake, precision matters much more than volume.

Sometimes we’ll still do conversions, but smaller “bracket management” conversions instead of giant headline-grabbing ones. Sometimes charitable strategies like Qualified Charitable Distributions (QCDs) may already solve part of the future RMD problem without needing aggressive Roth moves.

Again, this is why there’s no universal answer.

The best strategy on paper is not always the best strategy in real life.

The Biggest Mistake I See

The biggest mistake I see with Roth conversions is advisors treating them like a product instead of a planning decision.

A Roth conversion impacts:

• taxes,
• Medicare,
• estate planning,
• investments,
• charitable planning,
• and retirement income.

That means your advisor and CPA should absolutely be coordinating together.

At Members’ Wealth, we spend a lot of time modeling different scenarios before making recommendations. Sometimes we intentionally stop conversions right before another bracket. Sometimes we spread them across multiple years. Sometimes we decide the taxes today simply aren’t worth it.

That’s part of a comprehensive planning process.

Not forcing a strategy because it sounds sophisticated. Not treating every client the same. Just thoughtful analysis focused on aligning decisions with long-term financial goals.

Final Thoughts

Roth conversions can be fantastic tools in certain situations. I use them often.

But I also think the financial industry oversimplifies them.

For Julie, the opportunity may come later.

For Drew, the gap years may create a once-in-a-lifetime planning window.

For Blake, Medicare and cash flow considerations may matter more than maximizing conversions.

The right answer usually isn’t “always convert” or “never convert.”

It’s: “Let’s look at the full picture first.”

That’s the difference between selling a strategy and building a real financial plan.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon.

These examples are for illustrative purposes only and do not represent actual client experiences. Individual results will vary based on personal financial circumstances and tax laws.

About the Author – Stu Caplan, CFP®

Stu Caplan is Senior Wealth Strategist at Members’ Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions.

The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of industry experience, Stu and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations.

Stu received his MBA from The Robert H. Smith School of Business at the University of Maryland and his bachelor’s degree from the Eller College of Management at the University of Arizona. Stu resides in Bucks County, PA with his wife and two sons. He’s an avid golfer and is thrilled that his boys have embraced the game. He also volunteers his time as a board member of the PKD Foundation and Abrams Hebrew Academy.

To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453. 

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