Year-end is popular for Roth conversions — when to make an exception
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As the calendar draws to a close, some investors may be eyeing individual retirement account conversions to Roth based on long-term goals. With some exceptions, right now is Roth conversion season for good reason, experts say.
Strategy transfers your pre-tax or non-deductible IRA fund Roth IRA to usher in future tax-free growth. But the trade-off here is that you owe taxes up front on the converted balance.
Roth conversions are popular among young retirees because they can typically convert funds in lower income tax brackets than during their working years. Additionally, for retirees, earnings are often reduced before claiming Social Security and making required withdrawals.
There’s a reason why year-end Roth conversions are popular: The strategy requires net current-year revenue estimates, which can be more difficult before the fourth quarter. Conversions often include multi-year tax projections.
Tax uncertainty in 2025
Many provisions of the 2017 Tax Cuts and Jobs Act were originally set to expire at the end of 2025. This left investors uncertain about future tax brackets before Republicans signed them into law. Donald Trump’s “big beautiful bill” in July.
And now, many financial advisors are watching as Congress debates Affordable Care Act health insurance subsidies during the government shutdown. The outcome is important for young retirees considering a Roth conversion, as higher income could impact eligibility for ACA premium subsidies.
Additionally, many investors are still waiting for estimates for year-end mutual fund distributions, which typically hit brokerage accounts in November or December.
“That’s why we do tax planning at the end of the year,” said Tommy Lucas, a certified financial planner at Moisand Fitzgerald Tamayo in Orlando, Florida. His firm is ranked No. 69 on CNBC’s 2025 Financial Advisor 100 list.
Some advisors argue that it’s better to complete Roth conversions earlier in the year to begin tax-free growth sooner. But others say that early-year conversions without a solid estimate of current year revenue can be a mistake.
“You have no idea what’s going to happen before December,” Lucas said.
Earning more income than expected can be a problem because it could cause other tax benefits to phase out.
Search for other Roth conversion ‘opportunities’
While many advisors wait until the end of the year for Roth conversions, there may be other times when the strategy makes sense, according to Tyson Sprick, CFP and managing partner at Caliber Wealth Management in Overland Park, Kansas.
For example, some consultants Take advantage of a market downturn to convert a smaller balance and pay less upfront taxes. Investors can then see tax-free growth in their Roth accounts when the market recovers.
Sprick’s firm used this strategy during tariff fluctuations in early 2025. For some clients, they used about half of the year’s estimated Roth conversion budget when the market crashed and had plans to complete the remaining 2025 conversions in December.
“While we’re certainly not market timers or advocates of being too cute, there are opportunities throughout the year,” he said.
