When to Use a Roth Conversion (and When It’s a Waste)

One question that’s been coming up more frequently in recent months is: “Should I do a Roth conversion?” It’s a concept that’s gained a lot of attention, and while it can sound appealing, it’s not the right move for everyone.

Let’s start with the basics. A Roth conversion means taking money from your pre-tax retirement account (like a traditional IRA or 401(k)) and moving it into a Roth IRA. When you do this, you pay taxes now on the converted amount so that all future growth, and withdrawals, can be tax-free. In short, it’s a trade-off: pay taxes today to avoid them later.

But here’s the catch, Roth conversions are rarely the best strategy for people who are still in their peak earning years. If you’re working full-time and already in a higher tax bracket, converting a large amount could trigger a hefty tax bill unnecessarily.

Where Roth conversions do make sense is for those at or near retirement, especially during years when your income temporarily drops. For example, after you stop working but before Social Security and required minimum distributions (RMDs) begin, you might find yourself in a lower tax bracket. That’s often a sweet spot for partial conversions.

For everyone else, especially those still building wealth, the smarter move is simpler:

• Start contributing directly to a Roth IRA or Roth 401(k), if your plan allows.
• Even small contributions (2–5% of your pay) add up over time.
• Younger earners (30s and below) should lean fully into Roth contributions if possible.

By steadily building your tax-free retirement bucket, you’ll have greater flexibility later on when it comes to withdrawals and tax planning, without taking a one-time tax hit now.

At Merited Wealth, we help clients think long-term, not just about this year’s tax bill but about how today’s decisions shape future flexibility. The goal isn’t to find the “trendiest” strategy, it’s to create balance across your tax-deferred and tax-free accounts so you can retire with confidence and control.

Think of it this way: you're building two buckets for retirement. One that's tax-deferred (your traditional 401(k) or IRA), and one that's tax-free (your Roth). Both give you flexibility when it's time to actually use the money.

If you're under 35 and can swing it? Go all-in on Roth contributions now. In your 40s with more obligations? Even 5% to a Roth is a win.

Most 401(k) plans allow Roth contributions, you just have to elect it. If you run your own company plan, make sure your advisor has built this option in.

The Bottom Line

Stop worrying about converting large lump sums. Start directing a portion of your ongoing contributions to Roth accounts instead. It's simpler, smarter, and you'll thank yourself in 20 years.

If this resonates and you want to map out what makes sense for your specific situation, let's talk. Sometimes a 30-minute conversation saves you from years of second-guessing.