Should You Make a Roth Conversion Before Year-End?

Your 2026 Planning Checklist

• IRAs & Roth
• Retirement Planning
• Tax Planning

A year-end Roth conversion may make sense when paying tax today could improve your long-term retirement plan. The decision depends on your current and expected future tax rates, available cash, withdrawal needs, and the effect of additional income on other costs.

A Roth conversion is not automatically a tax-saving move. Before converting, compare several options—including converting nothing.

For retirees and people approaching retirement, the months before December 31 are a useful time to review whether a conversion fits this year’s financial picture.

What Is a Roth Conversion?

A Roth conversion moves money from a traditional IRA or another eligible retirement account into a Roth account. Previously untaxed amounts generally become taxable income for the year of the conversion.

The potential benefit comes later: qualified Roth IRA withdrawals are tax-free, subject to applicable requirements. A conversion changes when you pay taxes; it does not eliminate the tax on previously untaxed retirement savings. IRS Roth IRA guidance, IRS distribution guidance

Roth Conversion vs. Roth Contribution

Feature	Roth IRA conversion	Regular Roth IRA contribution
Source of money	Existing eligible retirement savings	New contributions
Income restrictions	No income ceiling on conversions	Income limits apply
Annual amount limit	Not subject to the regular contribution limit	Annual contribution limits apply
Tax treatment	Previously untaxed amounts generally become taxable	Contributions are made with after-tax money
Planning question	Is paying tax now worthwhile?	Are you eligible to contribute?

A conversion does not use up your regular IRA contribution allowance. Account eligibility and transaction rules still apply. IRS contribution and conversion guidance

When Might a Year-End Roth Conversion Make Sense?

A conversion deserves consideration when your current circumstances create a potentially favorable opportunity.

Situation	Why a conversion may deserve review	What to check
You recently retired	Your income may be lower after your paycheck stops	Other income, healthcare costs, and cash needs
You have unusually low income this year	Additional taxable income may be less costly than in other years	Federal and state tax projections
You hold substantial pretax retirement savings	Moving some money to Roth may reduce future pretax balances	Projected withdrawals and future RMDs
You want more withdrawal flexibility	Different account types can provide more options	Your expected spending and withdrawal plan
You are planning for heirs	Account tax treatment can affect estate decisions	Beneficiary circumstances and distribution rules

These are reasons to run a projection—not reasons to convert automatically.

When Might a Roth Conversion Be Less Attractive?

A conversion may be less appealing when:

• You expect a meaningfully lower tax rate when you withdraw the money.
• You need the funds soon.
• Paying the tax would strain your emergency reserves.
• The added income would significantly increase other costs.
• You already have unusually high taxable income this year.
• You have not confirmed how after-tax IRA contributions affect the calculation.

The largest possible conversion is not necessarily the most useful conversion.

1. Estimate the Tax Cost Before Choosing an Amount

Start with a projection of your full-year income.

Include wages, pensions, retirement distributions, investment income, realized gains, and other taxable income. Then compare the results with different conversion amounts.

If you have made nondeductible traditional IRA contributions, do not assume you can convert only those dollars tax-free. The calculation generally considers your traditional, SEP, and SIMPLE IRAs together. Accurate basis records and Form 8606 reporting matter. IRS Form 8606 instructions

Compare These Scenarios

Scenario	What to evaluate
No conversion	Expected taxes and future withdrawal needs
Smaller conversion	Added tax and potential long-term benefit
Larger conversion	Added tax, income-related costs, and cash requirements

Action: Compare the total cost of each option, rather than focusing only on your federal tax bracket.

2. Check the Effect on Medicare Premiums

Taxable Roth conversion income can affect Medicare premium surcharges.

Medicare’s income-related monthly adjustment amount, or IRMAA, applies to Part B and prescription drug coverage for beneficiaries above applicable income thresholds. Social Security generally uses tax information from two years earlier.

That means taxable conversion income in 2026 could affect Medicare premiums in 2028. The outcome depends on your total income and the thresholds applicable to that premium year. Social Security guidance

Action: Include potential Medicare costs in your conversion analysis. Do not assume that converting before Medicare enrollment avoids the lookback.

3. Coordinate the Conversion With Required Distributions

Your required minimum distribution cannot be converted to a Roth IRA.

If an RMD applies, coordinate taking the required amount before converting additional eligible funds. A conversion does not satisfy the RMD requirement.

Roth IRAs do not require distributions during the original owner’s lifetime, although beneficiaries have distribution requirements. IRS distribution guidance, IRS RMD guidance

Action: Confirm your RMD obligations before submitting conversion instructions.

4. Decide How You Will Pay the Tax

Your conversion plan should include a tax-payment plan.

Using funds outside the retirement account may allow more of the converted money to remain invested. However, those funds may also be needed for living expenses, emergencies, or upcoming purchases.

If money is withheld from a retirement distribution instead of converted, that amount has separate distribution consequences and may be subject to an early-distribution tax depending on your circumstances. IRS conversion guidance

Ask:

• How much tax will the conversion add?
• Which funds will cover that cost?
• Will your remaining cash reserves be sufficient?
• Should estimated payments or withholding be adjusted?

Action: Review payment timing with your tax professional rather than assuming the entire tax can wait until filing season.

5. Confirm Timing and Withdrawal Rules

For a straightforward direct conversion intended for 2026, arrange completion before December 31. Ask your custodian about its processing cutoff and confirm the tax-year treatment of your transaction. Different transfer methods can have additional timing requirements. IRS conversion guidance

Also review how soon you might need the converted money. Roth IRAs have separate five-year rules involving qualified earnings withdrawals and certain early withdrawals of converted amounts. Your age and account history matter. IRS Roth distribution guidance

Action: Confirm timing and withdrawal consequences before moving funds.

Your Year-End Roth Conversion Checklist

Frequently Asked Questions About Roth Conversions

Review Your Roth Conversion Options With LaxFP

A Roth conversion should support your retirement plan—not become a year-end task completed simply because the calendar is running out.

For households in La Crosse, Onalaska, and surrounding communities, La Crosse Financial Planning helps connect tax planning with retirement income and investment decisions.

Explore our financial planning services to review whether a Roth conversion fits your circumstances.