It used to be employers’ problem.

Featuring insights from financial advisors in the Wealthtender community

Omar MorilloAlex BridgesClaire Thornton

Now it’s ours…

Until the start of the 401(k) plan, in the 1980s, most American workers relied on three things for retirement:

• Social Security, funded jointly by employees and employers, each paying in an amount that started at 1% of employee wages in the 1930s, and is now 6.2% each.
• Defined benefit pensions, funded by employers, with payouts based on employees’ length of employment with the specific employer, and their final salary.
• Private savings, funded by employees to the extent that they choose to save and invest some of the money they earn, rather than spend it all.

But employers didn’t love the pension system.

A CNBC article quotes Monique Morrissey, an economist at the Economic Policy Institute, “The risk is all on the employer or the pension fund. The pension fund or the employer has to figure out how many years on average the people in the pension fund are going to live and has to tie the benefits to projected earnings.”

The employer’s pension fund is on the hook for those benefits, whether or not they manage to bring in market returns high enough to bridge the gap between employer contributions and employee benefits.

The 401(k), however, changed all that.

Now, our retirement “stool” has only two legs:

• Social Security.
• Private savings, including 401(k) plans.

We didn’t just change retirement plans; we changed who carries the risk.

As a “defined contribution” plan, a 401(k) plan puts the employer on the hook only for the current contributions they choose to make. Not for investing well or ensuring the resulting balance provides enough retirement income for the retiree’s lifespan.

In short, employers shifting from defined benefit to defined contribution plans moved longevity risk, market risk, and behavioral risk from corporations to individuals, and most people didn’t notice until it was too late.

Worse, most individuals were never trained to manage those risks.

Understandably, most people are unhappy about it.

According to the National Institute on Retirement Security (NIRS), “A national opinion poll finds that working age Americans are increasingly worried about retirement, and they see a return to pensions as a way to restore the American Dream of retirement. Eighty-three percent of respondents say that all workers should have a pension so they can be independent and self-reliant in retirement, and more than three-fourths of Americans agree that those with pensions are more likely to have a secure retirement.”

How Much Have Americans Actually Saved for Retirement?

According to the Investment Company Institute, at the end of the third quarter of 2025, US retirement assets topped $48 trillion, including:

• $18.9 trillion in Individual Retirement Accounts (IRAs) – private savings
• $13.9 trillion in defined contribution plans like 401(k), as well as the less common 403(b) and 457 plans – private savings again
• $12.6 trillion in defined benefit plans (private and government) – pensions
• $2.6 trillion in annuity reserves – a form of private savings

Those look like big numbers, but let’s break them down by household to see what people actually get to retire on.

According to Federal Reserve data, the average American household where the “reference person” is aged 65-74 has about $609k in retirement funds. For those aged 75 or older, that number is significantly lower, at $462k.

But that’s the average, which is skewed by the very wealthy.

A more informative measure is the median, the value at which half the group is above, and half below.

There, the numbers are significantly lower, at $200k for those aged 65-74 and $130k for those 75 or older.

Americans have other financial assets (e.g., savings accounts, taxable portfolio, etc.) that can also be tapped in retirement, where the averages are $897k and $826k for the two age groups, respectively; and the median is again much lower, at $120k and $50k, respectively.

Summing the two types of accounts, the average for 65-74 year olds is just under $1.6 million, but the more illustrative median is only $320k (Table 1).

Table 1. Average retirement funds and total financial assets look substantial, but the median, which isn’t skewed by the small percentage of the uber-wealthy, is far from enough.

A $320,000 nest egg may sound substantial, but spread across a 25- or 30-year retirement, it offers a safe monthly draw of just $1000 to $1500.

That’s closer to a supplement than a solution, barely covering the average rent or mortgage payment, let alone groceries, utilities, and healthcare expenses.

That’s not retirement comfort.

That’s retirement fragility.

So maybe Social Security closes the gap?

Can Social Security Close the Retirement Savings Gap?

That depends.

Mostly, it depends on your income, since Social Security is progressive by design. Its Primary Insurance Amount (PIA) replaces a larger fraction of lower incomes and a smaller fraction of higher incomes.

The PIA formula is a sum of three amounts relating to your Average Indexed Monthly Earnings (AIME, Table 2), which for 2026 are:

• For the first $1,286 of your AIME, your benefits replace 90%.
• For the portion between $1,286 and $7,749, your benefits replace 32%.
• For anything above $7,749, your benefits replace 15%.

All this ignores the looming exhaustion of the Social Security Trust Fund, now projected to happen in 2032. If no changes are enacted to address the issue before then, according to the Committee for a Responsible Federal Budget (CRFB), benefits would have to be cut by about 24%.

If implemented across all three PIA components, such a cut would change PIA to (in 2026 dollars, Table 2):

• For the first $1,286 of your AIME, 68.4%.
• For the portion between $1,286 and $7,749, 24.3%.
• For anything above $7,749, 11.4%.

Table 2. What Social Security retirement benefits replace now, and once the trust fund runs out (likely in 2032), if benefits are cut. Note that a 24% cut would address only the immediate shortfall. As the years go by, that shortfall is expected to worsen.

The CRFB states, “We estimate that this would be equal to an $18,100 annual benefit cut for a dual-earning couple retiring at the start of 2033 – shortly after trust fund insolvency. At the same time, those retirees might experience reduced access to health care due to an 11 percent cut in Medicare Hospital Insurance payments. The cuts would grow over time as scheduled benefits continue to outpace dedicated revenues.”

How Confident Are Middle-Income Americans About Retirement?

With the above in mind, it’s little wonder that a CNO Financial Group survey found that, “Among middle-income Americans ages 50 to 85, one in three (32%) say they feel less confident in their retirement plans than they did a year ago, and two in five (41%) doubt they will have enough money to live comfortably throughout retirement—including nearly half (49%) of pre-retirees.”

They find that the top concerns are inflation, outliving savings, and cuts to Social Security benefits.

The NIRS survey agrees with CNO, “When asked if the nation faces a retirement crisis, 79 percent of Americans agree there indeed is a retirement crisis, up from 67 percent in 2020. More than half of Americans (55 percent) are concerned that they cannot achieve financial security in retirement. When it comes to inflation, 73 percent of respondents said recent inflation has them more concerned about retirement.”

There are some obvious reasons why these issues hit middle-income Americans especially hard.

In a Yale Tobin Center for Economic Policy report, the authors find that “in two-thirds of plans, employer contributions exacerbate pay inequity. Employer contributions are highly concentrated, with 44% of dollars accruing to the top 20% of earners.”

This isn’t surprising, since the highest earners have a higher employer matching contribution cap (which is usually a percentage of income), plus, these high earners are typically better able to contribute a larger fraction of their income to their retirement plan.

Tax incentives are similarly skewed toward higher-income earners, since retirement savings tax deductions impact taxpayers’ marginal tax brackets, which, in our progressive tax system, are higher for high earners.

For example, if you earn enough to reach the 24% tax bracket and live in a state where your state and local income tax is another 8%, and don’t itemize, every dollar you contribute to a tax-deferred retirement plan reduces your take-home pay by $0.68. If, on the other hand, your marginal federal tax rate is 12%, with the same state and local tax rate, every dollar you contribute to your retirement plan reduces your take-home pay by $0.80.

As a result of all the above, middle-income Americans feel increasingly stretched thin, being “too rich for help, but too poor for comfort and security.”

What Financial Challenges Make Retirement Harder for Middle-Income Americans?

Retirement insecurity is no longer just a low-income problem. It is increasingly a middle-income margin problem. Multiple financial challenges impact middle-income Americans:

• Liquidity constraints driven by higher prices.
• Tax incentives skewed toward higher-income earners.
• Employer retirement plan matching contributions benefiting high-earning employees.
• Historically high real estate costs, along with mortgage rates that are more than double what they were a few years ago.
• Social Security benefits replace a small fraction of even middle-income earnings, especially if those benefits get cut as a result of the trust fund running out.
• Healthcare costs rising faster than overall inflation.

With all these, it’s especially difficult to not just save enough for a comfortable retirement, but even more so to build in a sufficient margin of safety or even know how much is “enough.”

What Financial Advisors Recommend

I asked several financial advisors to weigh in on the topic. Here’s what they have to say.

Q. Many middle-income households appear “fine” on paper but have very little margin of safety. In your experience, how common is this, and what does it look like in real life?

A. Omar Morillo, Senior Wealth Advisor, Imperio Wealth Advisors, answers:

It’s extremely common to see middle-income households pass a static replacement-rate test on paper but collapse under stress testing. They may have a decent projected income in retirement, but with minimal emergency savings, high discretionary spending, and no buffer for market downturns or healthcare shocks. The slightest deviation from assumptions turns ‘fine’ into fragile.

Omar MorilloImperio Wealth Advisors

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Alex Bridges, Wealth Advisor & Founder of Tiverton Wealth, agrees:

It’s very common. I regularly meet people with solid incomes, nice homes, and good careers who look financially stable from the outside. But when we review the numbers, there is little to no savings and no real investing happening. Often, they tell me they can’t free up anything each month. More often than not, it comes down to lifestyle creep. Income rises, spending rises with it, and the safety margin never gets built.

Alex BridgesTiverton Wealth

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Claire Thornton, Founder & Financial Planner at Hyla Financial, says:

It’s a confusing place for people to find themselves. Among six-figure earners (especially young families juggling childcare on top of everything else), I often hear the same refrain: ‘We feel broke.’ More often than not, that feeling is a signal that spending and values have drifted out of alignment. It’s time to go back to basics and measure goals against how money is being spent.

Claire ThorntonHyla Financial

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Q. Since the shift from defined benefit pensions to 401(k)-style plans, individuals now bear longevity, market, and behavioral risk. Which of these risks do you see creating the most problems for middle-income retirees?

A. Morillo again:

All three risks matter, but behavioral risk is the silent killer for middle-income retirees. People underestimate how emotions distort savings behavior and withdrawal timing. You can have good longevity assumptions and decent market returns, but if someone stops contributing too early, chases returns, or panics in downturns, the outcome is materially worse.

Omar MorilloImperio Wealth Advisors

Bridges agrees again:

Behavioral risk, without question. Markets go up and down, and people are living longer. Those are realities. But what hurts most people is procrastination, under-saving, and emotional decision-making. I have many retired clients who only ever had 401(k) plans and are doing just fine. The difference is that they were disciplined. They consistently contributed, often maxed out their plans, and stayed invested.

Alex BridgesTiverton Wealth

Thornton sees another risk as the most important:

The risk I see creating the most problems for middle-income retirees isn’t market volatility, it’s distribution management. A single additional dollar of income can trigger meaningful downstream consequences. Crossing an IRMAA [Medicare’s Income-Related Monthly Adjustment Amount] threshold can lead to higher Medicare premiums two years later, while poor income-tax coordination can shift Social Security from 50% taxable to 85% taxable or push capital gains from the 0% into the 15% bracket. For many middle-income retirees, the challenge isn’t how much they’ve saved, but how (and when) they draw from pre-tax, Roth, and taxable accounts. Thoughtful distribution sequencing can materially improve outcomes!

Claire ThorntonHyla Financial

Q. If Social Security benefits were reduced by roughly 20–25% in the next decade, how would that affect middle-income retirees differently from higher-income retirees?

A. Bridges says:

Middle-income retirees would feel it more. They tend to rely on Social Security for a larger portion of their retirement income. Higher earners usually have more diversified income sources and larger investment portfolios to cushion the impact. For many middle-income households, a reduction of that size would require real spending adjustments or a delay in retirement.

Alex BridgesTiverton Wealth

Morillo totally agrees:

A substantial reduction in Social Security isn’t just a cut in income. It erodes the floor of retirement security. Middle-income retirees depend on Social Security for a larger share of their essential spending than high-income retirees, who have diversified income sources. Reducing benefits by 20–25% would push many from ‘just managing’ into outright shortfalls.

Omar MorilloImperio Wealth Advisors

Q. If a middle-income household wants to increase its retirement “safety margin” over the next 5–10 years, what is the single most impactful change you would recommend?

A. Bridges suggests:

Increase savings and be disciplined about investing. If you have 10 years, that’s a meaningful length of time. Max out retirement contributions, cut unnecessary spending, and stay consistent. And just as important, work with a fee-only advisor who specializes in retirement planning. Transparent advice with no product incentives can make a significant difference in the final stretch before retirement.

Alex BridgesTiverton Wealth

Morillo expands:

The single most impactful change is prioritizing savings earlier and consistently, even at the expense of current lifestyle. Speeding up contributions when you’re earning income leverages compound growth and creates a vital safety margin that can absorb longevity risk, market volatility, and unexpected needs.

Omar MorilloImperio Wealth Advisors

The Bottom Line: How to Build a Bigger Retirement Safety Margin

The retirement trap is no longer just poverty.

It’s having little if any safety margin. Having too much to qualify for help, but not enough to feel safe.

The most important question then becomes, what can you do to increase your retirement safety margin?

The main things under our individual control include the following:

• Increase your retirement margin by resisting lifestyle inflation in housing. Just because the bank will lend you more doesn’t make it wise to borrow every dollar they offer.
• Only buy a car (or two) if you need it (or them). If you do buy, buying a new, reliable car and driving it for at least 10 years proves to be less expensive than buying used cars.
• Find ways to increase your income. This can be achieved by learning skills your employer values, taking on tasks that make your supervisor’s job easier, and/or monetizing existing or new skills through a side gig.
• Each time your income grows, dedicate at least half and up to two-thirds of the increase to retirement investments. Use the remaining half or third to enhance your enjoyment of life in the present. This makes it easier to stay the course.
• Try to keep your fixed costs as low as possible as a fraction of your overall budget, especially in retirement. The flexibility this gives you allows higher safe draws in retirement.

Frequently Asked Questions

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

About the author

Opher Ganel, Ph.D.

Contributing Writer, Wealthtender

My career has taken some unexpected turns, from earning a PhD in experimental high-energy physics, to conducting cosmic-ray research in Antarctica, to supporting NASA projects and programs, to running my own consulting business. I also run several other small businesses and help my wife run her Marriage and Family Therapy practice.

Those experiences taught me to question assumptions, think critically, and recognize that real-world decisions of any significance rarely have simple answers that apply to everyone. Today, I bring that perspective to writing about personal finance. Drawing on my analytical background, business experience, and research, I explore financial decisions, challenge conventional wisdom, and help readers understand the tradeoffs that can affect their financial well-being. To complement my own research and experience, I also weave insights from financial professionals into my articles, drawing on their expertise and real-world experience helping clients navigate financial decisions and challenges.

At medium.com/@opher-ganel, you can read more of my articles and subscribe to receive email notifications when new ones come out.

Read more from Opher →

A few years before retiring, I realized something troubling.

Featuring insights from financial advisors in the Wealthtender community

Jeffrey J SmithMike HunsbergerStephen Mazer

Nearly all of my portfolio sat in tax-deferred accounts. That meant that once Required Minimum Distributions (RMDs) began, my taxable income, and thus my taxes, would spike, whether I needed the money or not.

I asked our accounting firm, which offered annual tax strategy meetings, whether Roth conversions made sense for us, and if so, how much and when.

Their answer was both surprising and disappointing. They said it was outside the scope of their expertise.

Really? Roth conversions, outside the scope of tax strategists?

It turned out to be a case of, “If you want it done right, do it yourself.”

So, I turned to the huge spreadsheet I developed to project our income, expenses, taxes, and net worth for the next several decades, and added two new pieces:

• Estimated annual taxes
• Adjustable annual Roth conversion amounts for the 10 years I had until RMDs hit

I’d have loved to tell you the results led to a clear and inescapable conclusion.

Unfortunately, that would be a lie.

The projected results were nuanced:

• In the years we’d run the conversions, our taxes would naturally increase, significantly reducing our projected net worth by the time we had to start RMDs.
• Then, gradually, our net worth would recover and climb back to breakeven in my mid-80s.
• To really benefit, we’d need to survive into our 90s or beyond.
• Even then, the difference would have amounted to just a couple of percentage points of our net worth at that point.

In short, I’d need to voluntarily write large tax checks in my 60s and 70s and then wait decades to benefit, with only a one-in-seven chance of reaching my 90s, a famously changeable tax code, and projections far less precise than 2%.

All of that made Roth conversions feel like an expensive bet on a future I might not even see.

So, is the logical conclusion that there’s no point in converting, ever?

Not so fast.

Now that I’m retired, I added another tweak to my spreadsheet, optimizing the source of money we’d draw to cover expenses, how much we’d take each year from our relatively small taxable accounts vs. tax-deferred ones.

This showed me that there will be some years when our taxable income will be low enough that our marginal federal tax rate will be 12%.

When that happens, Roth conversions can make sense.

But how can you decide whether to do a Roth conversion, and if so, when and how much, without building a monster spreadsheet?

That’s what this article is all about.

How Much Tax Do You Pay on a Roth Conversion?

When you convert money from a tax-deferred account to a Roth, the converted amount is treated as taxable income that year. That increases your current-year tax bill.

If the conversion pushes your income high enough, you may land in a higher marginal bracket and even have to pay Medicare surcharges (more on that later). That can be an expensive mistake.

But what if you convert from a post-tax traditional IRA?

If you hold both pre-tax and post-tax funds across your traditional IRAs, the IRS applies the pro-rata rule. Each dollar converted is treated as a proportional mix of both.

For example, if you have $495,000 in pre-tax IRA funds and $5,000 in post-tax contributions, then 99% of any conversion would be taxable income.

The key point here is simple. Roth conversions usually create an immediate tax cost, driving people to look for a “window” when that tax impact would be lowest.

When Is the Best Time for a Roth Conversion? Why “Windows” Aren’t Enough

Several scenarios are often mentioned as ideal times to convert.

• When you expect tax rates to increase in the future.
• After a market crash, when you can convert assets at temporarily depressed prices.
• During a temporary income dip, such as following a job loss, a no-bonus year, etc.
• When you’re still filing married filing jointly, before your widow(er) must file as single.
• If you plan to move from a high-tax state to a state with lower (or no) state income tax, converting after the move offers more value.
• In early retirement, before RMDs begin, when taxable income may be lower.

The first requires a functioning crystal ball. (If you have one, I have some questions about the future.)

The second and third can work, but require you to pay higher taxes when you can least afford it.

The fourth and fifth are valid reasons to consider converting when other factors align, but they don’t stop it from being a bad idea if the brackets don’t support it.

The sixth is the most persuasive. You retire. Your taxable income drops. Your marginal tax rate falls. Thus, it must be the best time to convert aggressively.

That logic sounds airtight.

And in some cases, it’s exactly right.

The problem is that in many other cases, it’s incomplete.

A lower tax rate today doesn’t automatically improve your long-term outcome. The benefit depends on how long you live, future tax brackets, RMD size, and taxable income flexibility.

That is why a generic “window” narrative can be misleading.

Roth conversions aren’t about following a generic rule. They’re about managing your marginal tax brackets over many years.

The danger isn’t because Roth conversions are necessarily bad. It’s in converting aggressively out of fear, rather than clarity.

For some retirees, conversions can make sense, and emphatically so.

For others, the benefit may be modest, delayed, and/or dependent on assumptions that may never materialize.

Which brings us back to the core problem: How do you decide, without building a massive projection model, whether converting makes sense for you?

How to Decide on a Roth Conversion: The Three-Legged Stool Framework

Detailed projections are the best way to assess if, when, and how much to convert.

This can be using a spreadsheet, if you have a good grasp of all the relevant factors, or you can ask your financial advisor to run the numbers, including Monte Carlo simulations of market returns.

If you don’t want to build such a spreadsheet and don’t have (and don’t want to hire) a financial advisor, three straightforward considerations offer a framework to identify if Roth conversions are likely to work out well.

1. Tax Rate Difference
2. Time Until RMDs
3. Income Flexibility

If one leg is weak, the stool wobbles. If more legs are weak, let alone missing, it collapses.

Let’s dive a bit deeper into these legs.

Leg #1: Is Your Tax Rate Lower Now Than It Will Be Once RMDs Start?

For any specific year in which you’re considering a conversion, how does your current marginal tax rate compare to your likely rate once RMDs hit?

This includes state and local income tax and surcharges such as Medicare’s Income-Related Monthly Adjustment Amount (IRMAA). For 2026, the IRMAA Part B surcharge ranges from $974 to $5,844 annually, on top of the base premium. That’s a significant concern for those whose taxable income gets pushed too high.

Vanguard makes a compelling case that how you pay for conversion-related taxes may significantly impact the math: “… the tax payment source can shift the break-even point in meaningful ways. For example, when conversion taxes are paid from a taxable account — particularly one holding tax-inefficient assets or cash — the BETR [break-even tax rate] drops well below the investor’s current marginal tax rate. Likewise, basis in a traditional IRA or the potential for future backdoor Roth contributions can shift the math in favor of converting. This creates a wider ‘conversion zone,’ where even modestly lower future tax rates can still justify a Roth conversion.”

BETR takes into account the current marginal ordinary income tax rate, the basis of assets sold to fund tax payment for the conversion, investment time horizon, annual investment return, and dividend yields. Under Vanguard’s assumptions, someone in a 35% bracket who pays conversion taxes from idle cash could see the break-even tax rate drop to 14%!

The larger and more certain the spread between tax rates (or BETR and future rates), the stronger this leg of the stool.

If your current marginal federal rate is 12% and you expect RMDs to push you into the 24% bracket, or even the 22% bracket, that makes for a compelling conversion case.

If your current rate is 22% and RMDs aren’t likely to push you any higher than 24%, paying much more in taxes now to possibly save 2% in 10+ years is far less compelling.

This is what my own assessment was before I retired, and stays the same for most years now that I am retired.

But not for all years.

Clearly, none of us (not even those in Congress) can guess how the US tax code will change over the coming years or decades. What I do here is assume the rates will stay the same, with the brackets adjusting for inflation. This isn’t intended to be accurate, just a best guess for how an uncertain future will unfold in at least this one regard.

Leg #2: How Many Years Until Your RMDs Begin?

How long do you have until RMDs hit?

RMDs now start at age 73, but if you don’t have to start before January 1, 2033, that will be pushed further out, to age 75.

Does that give you five years? Ten? Fifteen?

The longer your runway, the less certain the calculus.

• More time for the tax code to change.
• More time for investments to grow tax-deferred (or tax-free if converted).
• More time for your spending habits to change.
• More time during which you could die.

My spreadsheet projected a breakeven point in my mid-80s. To benefit meaningfully, I’d need to live into my 90s, which is less likely than not.

This does not make conversions useless. It means the payoff is distant and uncertain, while the cost is immediate and guaranteed.

You’d have to prepay taxes today for a benefit that may not arrive for 20-plus years, if ever. That’s a serious trade-off, not a casual decision.

The longer you need to wait for an eventual benefit, the more cautious you should be.

One caveat to that is that if you’re considering a Roth conversion as an estate management tool, that will, by definition, benefit your heirs no matter how long you live.

Leg #3: How Flexible Is Your Taxable Income in Retirement?

This is one that many people overlook.

How flexible is your taxable income?

This could be because you can choose how to cover expenses, from taxable (ordinary income rate or long-term capital gains rate), tax-free, or tax-deferred money. It can also be because a large fraction of your budget is discretionary, allowing you to reduce spending in years when the tax impact is greatest.

This lets you deliberately lower your taxable income some years to make a Roth conversion more beneficial, while pushing higher taxable income into other years.

This is what I’m planning to do, now that I’m retired.

In years when I sell a property held for more than a year, I’ll owe taxes on any appreciation and/or depreciation recapture at lower long-term capital gains tax rates. However, this won’t push me into a higher marginal tax bracket.

The proceeds from such a sale may allow me to cover expenses without needing to draw tax-deferred money that triggers ordinary income taxes. This will allow me to make a highly beneficial Roth conversion, paying no more than 12% federal income tax, far lower than the brackets I’ll be in once RMDs hit.

If you have little flexibility here, your case for conversion becomes that much shakier.

When Does a Roth Conversion Make the Most Sense?

This is when a Roth conversion is most beneficial to you:

• Your current marginal tax rate is meaningfully lower than it will be once RMDs start.
• You have a long runway to time conversions strategically and for the converted funds to grow tax-free in a Roth account.
• You can deliberately manage your budget and how you fund it.

When Is a Roth Conversion Unlikely to Pay Off?

This is when a Roth conversion is least likely to benefit you:

• Your current tax rate isn’t meaningfully lower (or even higher) than what it will be when RMDs kick in.
• Your breakeven point is decades away.
• Future benefits depend on optimistic assumptions.
• You have little to no flexibility in controlling your taxable income through lowering spending and/or funding at least some of it from taxable, low-tax, or tax-free sources.

In such cases, you may still benefit, but the margin of safety is thin and the upside uncertain. The potentially small eventual benefit likely won’t justify the immediate cost.

If you prefer a quick diagnostic instead of a spreadsheet, here’s how the three legs work:

What Financial Advisors Say About Roth Conversions

I asked financial advisors for their thoughts on Roth conversions. Some of what they say may not be surprising, but some goes beyond conventional wisdom.

Jeffrey J Smith, Founder and Managing Partner of OWL Private Wealth Advisors, says:

To quote Ed Slott, ‘Your IRA is an IOU to the IRS.’ It may make sense to rip the band-aid off and accelerate the conversions to keep the marginal tax rate and Medicare IRMAA increase to only a few years early on in retirement, preferably more than two years before turning 65. If you have non-qualified funds to pay the taxes due, this can significantly increase the overall results, not only for the IRA owner but ultimately their beneficiaries. Like the tax code itself, a decision to convert or not isn’t a black or white answer for most, but we all know the saying that the only certainties in life are death and taxes. With a Roth conversion, you can decide when to pay the taxes, at a tax rate you know now, versus not knowing where you will fall in future years. That second part is out of your control.

Jeffrey J SmithOWL Private Wealth Advisors

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Mike Hunsberger, Owner, Next Mission Financial Planning, agrees:

The biggest factor [affecting the benefit of a Roth conversion]is future tax rates. It’s hard to know what those will be.” He adds several more important things,“Another big impact is whether you’ll actually use the converted dollars or if they will be passed on to your heirs. If the latter, it’s important to consider theirlikely tax rates when they inherit. Finally, it’s always useful to understand what happens when the first member of the couple dies, and the remaining spouse reverts to single tax rates. The important thing to remember is not to over-convert. If you don’t have other projected income, keeping some tax-deferred money can help you fill up the lower tax brackets in retirement, possibly in a lower tax bracket than what you converted at.

Mike HunsbergerNext Mission Financial Planning

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Stephen Mazer, Senior Wealth Advisor and Principal, Rational Wealth Solutions, points out how the decision is deeply dependent on your personal situation:

There are NO rules for who should or shouldn’t proceed with a Roth conversion, or when to do it. Solutions should be considered based on many factors. One of Thomas Sowell’s famous quotes, ‘There are no solutions. There are only trade-offs,’ applies here. Did you know you may not have to pay the taxes owed out of your own current accounts? Did you know there are ways to keep full market volatility/risk and other ways to negate much, if not all, of the market downside/risk during the conversion period? Talking with someone familiar with these strategies and who understands your goals will shine a light on what might be appropriate for your situation, bringing clarity to the process.

Stephen MazerRational Wealth Solutions

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The Bottom Line: Is a Roth Conversion Worth It for You?

At its core, a Roth conversion is a trade-off, paying guaranteed costs today for a likely benefit tomorrow that may be worth the cost and the wait.

Roth conversions are not about generic “windows” or rules.

They’re a bet that depends on three factors: (1) your tax-rate spread, (2) your time horizon until RMDs and your lifespan, and (3) your taxable income flexibility. When all three align, you’re most likely to gain a significant advantage from a conversion.

When one or more is weak, your benefit is less certain and likely smaller.

Conversions reduce your tax uncertainty, but at a cost you need to be willing to pay.

You don’t have to have an advisor (though a good one offers a lot of value).

You don’t need a monster spreadsheet.

You don’t need certainty about the future.

You just need a solid decision framework that clarifies your trade-offs.

Frequently Asked Questions

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

About the author

Opher Ganel, Ph.D.

Contributing Writer, Wealthtender

My career has taken some unexpected turns, from earning a PhD in experimental high-energy physics, to conducting cosmic-ray research in Antarctica, to supporting NASA projects and programs, to running my own consulting business. I also run several other small businesses and help my wife run her Marriage and Family Therapy practice.

Those experiences taught me to question assumptions, think critically, and recognize that real-world decisions of any significance rarely have simple answers that apply to everyone. Today, I bring that perspective to writing about personal finance. Drawing on my analytical background, business experience, and research, I explore financial decisions, challenge conventional wisdom, and help readers understand the tradeoffs that can affect their financial well-being. To complement my own research and experience, I also weave insights from financial professionals into my articles, drawing on their expertise and real-world experience helping clients navigate financial decisions and challenges.

At medium.com/@opher-ganel, you can read more of my articles and subscribe to receive email notifications when new ones come out.

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