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

Traditional and Roth IRAs can both play a major role in retirement planning. Intuit TurboTax explains how to think about which option may fit your situation best.

Traditional and Roth IRAs, simplified

A Traditional IRA gives you a tax benefit now, while a Roth IRA provides one later in retirement. A conversion means you pay taxes upfront so withdrawals can be tax-free in the future. In either case, the money is taxed only once, at the rate that applies when the tax is due.

That leaves one central question:

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

What is a Traditional IRA?

A Traditional IRA allows you to deduct contributions from taxable income for the year you make them. The amount you put into the account reduces your total income on your tax return.

If you have a 401(k) or another workplace retirement plan, your ability to deduct IRA contributions may be limited depending on your income. Withdrawals before age 59½ can trigger a penalty, with some exceptions, and required minimum distributions begin at 73. Withdrawals are taxed as ordinary income at the rate in effect that year. This can be attractive for people who expect to be in a lower tax bracket in retirement, though that is not guaranteed.

Traditional IRA as a piece of the pie

Think of income as a pie that the government taxes by taking a slice. A Traditional IRA lets you remove part of that pie before taxes are applied, leaving less income subject to tax. That is the benefit: you are not getting extra money, but rather reducing how much of your income is taxed.

What is a Roth IRA?

The Roth IRA works in the opposite way. Contributions do not come with an upfront tax deduction, but the account 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 After the account has been open for five years and you are at least 59½, earnings can also be withdrawn tax-free. Roth IRAs do not require distributions at any age. They also have income limits; for 2026, the phase-out begins at $153,000 for single taxpayers 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, the savings can grow into a larger pool by retirement, and the government does not tax that growth. The increase belongs to you.

Why convert to a Roth IRA?

A conversion moves money from a Traditional IRA, or directly from a 401(k), into a Roth IRA. You must pay tax on the converted amount, 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

Try to estimate whether you are likely to be in a higher bracket later. Your future tax rate is impossible to know exactly, but you can make an educated guess. Early in your career, income and taxes are often at their lowest. If retirement is close, you can estimate Social Security and pension income to get a clearer picture.

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

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

The bottom line

Both kinds of IRA can be useful tools for retirement planning. The best choice depends on your own financial circumstances.