Is a Roth IRA conversion worthwhile? The key factor to consider

Roth and Traditional IRAs can play an important role in retirement planning. In this overview, Intuit TurboTax explains which option may fit your situation best.

Traditional IRA vs. Roth IRA, in plain language

A Traditional IRA gives you a tax break now, while a Roth IRA gives you the benefit later in retirement. If you convert, you pay the tax upfront so withdrawals can be tax-free down the road. In either case, the money is taxed only once, at the rate that applies in the year the tax is due.

That leaves one basic question:

Will your tax rate be lower now, or when you would otherwise take the money out?

What a Traditional IRA is

A Traditional IRA allows you to deduct your contribution from taxable income for that year. The amount you put into the account reduces the income reported on your tax return.

If you participate in a 401(k) or another workplace retirement plan, your ability to deduct a Traditional IRA contribution may be limited by income. Money generally cannot be withdrawn before age 59½ without a penalty, aside from certain exceptions, and required minimum distributions begin at age 73. Withdrawals are taxed as ordinary income at whatever rate applies at that time. That can work well for people who expect to retire in a lower bracket, although it is not guaranteed.

Traditional IRA as a piece of the pie

Think of annual income as a pie, with the government taking a slice as tax. Putting money into a Traditional IRA removes part of that pie before the tax is calculated, so less income is taxed. Because less income is taxed, the overall tax bill is lower. The benefit is not extra money; it is simply income that is not taxed right away.

What a Roth IRA is

A Roth IRA works in the opposite way. You do not get a tax deduction when you contribute, but the money can grow tax-free.

You can withdraw your direct contributions from a Roth IRA at any time without taxes or penalties. After the account has been open for 5 years and you reach age 59½, any earnings can also be withdrawn tax-free. There are no required distributions at any age. Roth IRAs also have income limits; for 2026, the phase-out begins at $153,000 for single filers and $242,000 for married couples filing jointly.

Roth IRA as a piece of the pie

With a Roth IRA, the government takes its share before you set money aside. After that, what you save grows on its own, and that growth is not taxed later. Every dollar of growth stays yours.

Why people convert to a Roth IRA

A conversion moves money from a Traditional IRA, or in some cases directly from a 401(k), into a Roth IRA. The converted amount is taxed when the move happens, but once the money is in the Roth account, it is not taxed again.

Conversions from a traditional IRA to a Roth IRA must be completed within 60 days to count as a conversion contribution. Current law also allows a direct conversion from a 401(k) to a Roth account.

How to decide

Consider whether you are likely to face a higher tax bracket later. You cannot know your future tax rate with certainty, but you can estimate it. Early in a career, income and tax rates are often at their lowest. Near retirement, expected Social Security and pension income can help provide a more realistic estimate.

It may be worth a closer look if you are in the 10% to 12% bracket, expect higher income later, can pay the conversion tax from savings rather than from the IRA itself, and have years for the money to grow tax-free.

It may be better to wait if the conversion would push you into a much higher bracket this year, you would need IRA funds to pay the tax, or you expect to be in a lower bracket in retirement anyway.

The takeaway

Either type of IRA can support retirement planning goals. The better choice depends on your own financial situation.