2025 Roth Conversion Opportunities While Rates Are Still Low

As we head into 2025, high-income earners and retirees have a unique planning opportunity that may not be around for much longer: Roth conversions at today’s historically low tax rates. With the 2017 Tax Cuts and Jobs Act (TCJA) set to sunset at the end of 2025, now is the time to evaluate whether converting some of your pre-tax retirement savings to a Roth IRA could significantly reduce your long-term tax burden.

Why 2025 Matters

The TCJA temporarily lowered income tax rates and widened tax brackets, offering a more favorable environment for Roth conversions. When the law sunsets in 2026, tax brackets are expected to revert to their pre-2018 levels, which means many individuals and couples may find themselves in higher tax brackets, even with the same income.

For retirees who aren’t yet required to take required minimum distributions (RMDs) and high-income earners looking ahead, 2025 might be your final window to make a Roth conversion at today’s lower tax rates.

What Is a Roth Conversion?

A Roth conversion involves moving funds from a traditional IRA or other pre-tax retirement account into a Roth IRA. The catch? You pay income tax on the amount converted in the year you do it. The reward? Tax-free growth and tax-free withdrawals in retirement, with no RMDs from your Roth IRA.

Strategic Roth Conversion Planning

Rather than converting everything at once (and potentially pushing yourself into a much higher tax bracket), partial conversions offer a way to smooth out the tax impact over several years.

Here’s how:

• Fill up your current tax bracket without spilling into the next one

• Convert during low-income years (such as early retirement before Social Security or RMDs begin)

• Coordinate with other income sources (Social Security, pensions, IRA withdrawals) to reduce tax surprises

• Use taxable investment accounts or cash savings to pay the tax due on the conversion to maximize the amount staying in your Roth
  

Long-Term Benefits

• Tax diversification: Having both pre-tax and after-tax retirement accounts gives you more flexibility in retirement

• Potentially lower total lifetime taxes: Especially if future tax rates rise

• Leave a tax-free legacy: Roth IRAs pass to heirs tax-free, offering long-term generational planning opportunities

• Avoid future RMDs: Roth IRAs are not subject to required minimum distributions during your lifetime
  

Take Action Before the Window Closes

2025 could be your final chance to make a tax-efficient Roth conversion before higher brackets return. The key is understanding where you are now, and where your future income and taxes are headed.

Ready to explore the numbers?

We’ll create a personalized Roth conversion illustration that shows exactly how this strategy could benefit your long-term plan.

Schedule a consultation today and let’s make the most of this opportunity while it lasts.