I’m Taylor Sohns, CEO of LifeGoal Wealth Advisors, a Certified Investment Management Analyst (CIMA), and a Certified Financial Planner (CFP). The message here is straightforward: converting a traditional IRA to a Roth IRA often yields more harm than benefit. This is not about opinion. It’s about math, timing, and the way tax brackets work. Too many investors pay a large tax bill today for a benefit they may never need. My goal is to demonstrate why deferring taxes typically accelerates wealth accumulation and retains more of your money working for you.
“Don’t convert your traditional IRA to a Roth IRA. It’s just sheer math for these three reasons.”
The Core Argument
Most people consider a Roth conversion because they have heard that taxes will go up. That belief leads them to pay taxes now in the hope of saving in the future. The problem is threefold: the immediate tax hit is large, the lost compounding is real, and future tax rates are unknown. I’ve heard the “taxes will be higher” line my entire career, yet rates have moved down, not up. I would rather keep tax-deferred dollars growing and choose when to recognize income in lower-tax years, such as during early retirement.
- You pay a big tax bill today and may get pushed into higher brackets for the year of conversion.
- Money paid in taxes no longer compounds inside your account.
- There is no guarantee you’ll face higher tax rates later.
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Why Paying Taxes Now Hurts
Converting a traditional IRA to a Roth IRA turns deferred income into taxable income today. If you convert $200,000, that entire amount stacks on top of your other income for the year. It’s fully taxable at the federal level and, for many, at state and local levels. That can push you up multiple brackets. It can also impact other parts of your financial life, like deductions, credits, and Medicare premiums for higher earners.
Here’s what often happens. Someone thinks a conversion will “save taxes in the long run,” but the year of conversion becomes their most expensive tax year. If you were in a middle bracket before, the conversion can lift you into a higher marginal rate. That means each extra dollar converted gets taxed at the highest rate you’ve faced, not your average rate. It’s a hit that is hard to recover from.
There is also a cash flow issue. You need to pay that tax bill. If you pay it from the IRA itself, you withdraw even more, which increases the tax bill and reduces your account balance. If you pay with outside cash, you are still giving up real dollars today that could be invested. Either way, you slow your path to wealth.
The Cost of Lost Compounding
The second problem is simple but often ignored. Money sent to the tax authorities no longer compounds for you. That lost growth adds up over time. Suppose a $200,000 conversion triggers a 25% combined tax hit on the last dollar converted. You just wrote a $50,000 check. If left invested for 15 years at a modest growth rate, that $50,000 could have grown to a much larger sum. You handed away the seed and gave up the harvest.
Compounding favors dollars that remain invested for the longest period. Every dollar kept in your IRA continues to work. Every dollar paid in taxes stops working. Over decades, that difference can outweigh any guessed savings from future rates. This is why I prefer to delay taxes and allow the account to grow. When income falls in retirement, those withdrawals often get taxed at lower brackets, further improving the math.
The Myth of Inevitable Higher Taxes
The third issue is the belief that tax rates must rise. I hear it every year. It is used to sell Roth conversions as a “no-brainer.” But it’s not a sure thing. Tax policy changes in response to elections, budgets, and economic conditions. Over my career, despite the constant narrative of rising taxes, rates have drifted lower. Building a plan based on a guess is not prudent.
Even if rates do rise at the top, many retirees do not withdraw at those top brackets. They often have a mix of income sources. Social Security, partial withdrawals, and some taxable interest can place them in lower brackets than during working years. If you pay a high rate today to avoid a smaller rate later, you lose. That’s the trap.
“I’d rather not pay taxes now, continue growing my wealth faster, and pay taxes when I have a much lower level of income in retirement.”
A Walkthrough Example
Imagine a household with $120,000 of wage income. They’re considering a $200,000 Roth conversion. That conversion gets added on top, making their taxable income much higher for the year. The converted dollars get taxed at higher marginal rates. State and local taxes may also stack up. The one-time jump can be painful and may impact other items, such as deductions and certain credits.
Now, picture two timelines. In timeline one, they convert now, pay a large tax bill, and start with a smaller Roth balance. In timeline two, they keep the money in the traditional IRA. It compounds without the tax haircut. Later, when they stop working and income falls, they draw down the IRA. Those withdrawals hit lower brackets and may spread across many years. For many families, timeline two wins by a wide margin.
When Old Rules of Thumb Mislead
Simple slogans can do harm. “Roth is always better” is not a rule. A Roth gives tax-free withdrawals later, but that does not make paying taxes now a smart move. A good plan looks at marginal rates today versus likely marginal rates later, the power of compounding, the need for liquidity, and the timing of retirement income.
I focus on lifetime tax cost, not just one year. The goal is to withdraw dollars when your bracket is lower, or at least not higher. Retirees often have a window between retirement and required minimum distributions (RMDs) when their income is lower. That window may be a time to consider small, measured conversions if the rate math supports it. But that is a surgical decision, not a blanket move.
Addressing Common Concerns
Some worry about RMDs forcing them into higher taxes later. RMDs do increase taxable income. But that does not mean a big conversion today is the answer. You can manage RMDs by spreading withdrawals, planning around Social Security start dates, and blending accounts. Small annual conversions in lower-income years can help, but the key is to keep an eye on the bracket you’re filling each year, not to trigger the highest brackets in one shot.
Others cite the fear of future law changes. Laws do change. But big conversions assume the worst and lock in the highest rate today. I prefer flexibility. Defer now, reassess each year, and take advantage of low-income periods as they arise. That approach lets you adapt instead of guessing.
A Smarter Plan to Lower Lifetime Taxes
Here is a simple framework I use:
- Know your current marginal tax rate, not just your average rate.
- Estimate your likely retirement income bands and brackets.
- Map out a withdrawal plan that fills lower brackets first.
- Consider small, targeted conversions only in years when your bracket dips.
- Keep tax payments outside the IRA when possible to preserve compounding.
This plan keeps your wealth compounding and gives you multiple shots at timing taxes better. It avoids large, one-time conversions that often do more harm than good.
What If You Already Converted?
If a conversion already happened, focus on what you can control going forward. Ensure future savings are allocated to the correct buckets. Use tax-advantaged accounts at work. Keep an eye on your bracket each year. Look for years when income is low to recognize income at fair rates. The best time to plan taxes is every year, not just once.
Edge Cases Where a Conversion Might Fit
There are limited cases where a Roth conversion can help:
Low-Income Year: If you experience a one-time drop in income due to a sabbatical, business loss, or early retirement before starting Social Security, a small conversion may help you fill a low bracket. The key is keeping the converted dollars within that lower bracket.
No Heirs Needing Step-Up: If leaving pre-tax accounts to heirs who will face compressed distribution timelines and higher brackets, measured conversions can shift taxes to years where the rate is known and reasonable.
Large Outside Cash to Pay Tax: If you have ample cash to pay the tax and a clear plan that shows your future brackets will likely be higher for many years, a partial conversion might work. Even then, run the math carefully.
These are exceptions, not the rule. For most workers and retirees, the default answer remains no.
Behavior Matters as Much as Math
Taxes are numbers, but behavior drives outcomes. Writing a large check today is hard. Seeing your account shrink is harder. Then comes the third, less visible pain: the growth you will never capture in the dollars you already sent to the tax authorities. My recommendation keeps more money in your account for longer. It also reduces the chance of regret from overpaying now for a benefit that never arrives.
Putting It All Together
Here’s the clear bottom line.
- Big Roth conversions create a heavy tax bill at the worst time.
- Lost compounding on taxes paid now can cost you more than any future savings.
- Predictions about higher future taxes are just that—predictions.
I’m not against Roth accounts. I am against paying high taxes today without a strong, numbers-driven reason. Most people build more wealth by deferring taxes, letting compounding work, and choosing their withdrawal years wisely. That approach is calmer, more flexible, and, in many cases, more profitable.
If you want a rule of thumb to remember, use this: avoid large conversions, consider small ones only when your bracket is low, and keep your dollars compounding as long as possible. That’s how you keep more of what you earn and grow it over time.
