Most people know what a Roth IRA is.
Very few know when to convert to one — or why the timing matters so much.
This post is about one of the most underused tax strategies available to families: the Roth IRA conversion. Done right, it can mean hundreds of thousands of dollars in tax-free growth over a lifetime.
The Basic Difference
Traditional IRA: You contribute pre-tax dollars. The money grows tax-deferred. You pay income taxes when you withdraw in retirement.
Roth IRA: You contribute after-tax dollars. The money grows completely tax-free. You pay no taxes on qualified withdrawals in retirement — ever. And there are no required minimum distributions.
The question is not which is better in the abstract. The question is: at what tax rate are you paying?
Why Conversions Work
When you convert a traditional IRA to a Roth IRA, you pay income taxes on the converted amount in the year of conversion. The bet you’re making: your tax rate today is lower than it will be later.
This makes conversions most powerful during:
Low-income years — a business loss, career transition, sabbatical, or any year where your taxable income is unusually lowEarly retirement before Social Security begins — often a low-income windowYears when the market is down — you’re converting fewer dollars for the same future value
I converted my traditional IRA to a Roth during a year when my income was lower than usual. The math made sense: pay taxes now at a lower marginal rate, and enjoy tax-free growth from that point forward.
The Mechanics
Converting is straightforward:
Contact your IRA custodian and request a conversionChoose how much to convert (partial conversions are allowed — and often smart)The converted amount is added to your taxable income for that yearPay the taxes from non-IRA funds if at all possible (using IRA funds to pay the taxes reduces the compounding benefit)
Key consideration: Be careful not to convert so much that you push yourself into a significantly higher tax bracket. Often, converting up to the top of your current bracket is the right approach.
Kids and Roth IRAs
Here is a strategy most parents don’t know about: children can have a Roth IRA if they have earned income.
If your child has a summer job, does paid work for a family business, or earns income in any legitimate way, they can contribute to a Roth IRA — up to their earned income or the annual contribution limit, whichever is less.
Starting a Roth IRA at age 16 instead of age 30 means 14 additional years of tax-free compounding. The difference in retirement wealth can be staggering. This is one of the most valuable gifts you can give a working teenager.
Donor Advised Funds — The Other Side of the Same Coin
The Roth conversion is the right move in low-income years. In high-income years, the opposite strategy applies: bunch your charitable giving into a Donor Advised Fund (DAF) to maximize your deduction in the year it matters most.
A DAF lets you contribute assets (cash or appreciated securities) in a high-income year, take the full deduction immediately, and then distribute the money to charities over time — at your own pace.
The combination of Roth conversions in low years and DAF contributions in high years is a powerful year-to-year tax optimization strategy.
The Family Linchpin Checklist
The checklist includes a section on advanced financial planning — including a review of your retirement account structure.
Download The Family Linchpin Checklist Here
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The information in this post is for educational purposes only and does not constitute legal, tax, or financial advice. It is not a substitute for consultation with a qualified estate planning attorney, CPA, or financial advisor. Some links in this post may be affiliate links — see our full Affiliate Disclosure.
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