7 Roth Conversion Pitfalls

February 27, 2026 • By James Moore, CFP®

A Roth conversion allows you to move funds from a pre-tax account, such as a traditional IRA or 401(k), into a Roth IRA. The amount you convert will count as taxable income in the year of conversion. But once the funds are in the Roth account, they will grow tax-deferred, and future withdrawals will generally be tax-free as long as certain conditions are met. 

A Roth conversion can be a powerful financial planning tool. Done strategically, Roth conversions can help you save a lot on taxes in the long run. But if done without proper analysis, they could actually end up costing you more. If you are considering making a Roth conversion, here are seven common pitfalls to avoid.

1. Just Looking at Your Tax Bracket

At a very high level, it makes sense to consider doing a Roth conversion if your current tax rate is lower than what it will be in the future. But just looking at your tax bracket will not always give you the complete picture of your true tax rate. The tax code is complex, and additional income from a Roth conversion might affect you in a way that you did not anticipate. Here are a few examples:

Capital Gains and Dividends. Capital gains and qualified dividends have a different tax bracket structure than ordinary income, and income from a Roth conversion can impact these rates. For example, you might look at your tax bracket and calculate that you will pay a 12% tax rate on a Roth conversion. However, the additional income from the conversion could cause the tax rate on your qualified dividends to increase from 0% to 15%. In this scenario, you are actually paying a marginal tax rate of 27% (12% + 15%) on your Roth conversion, not 12%.

Medicare IRMAA. The income-related monthly adjustment amount (IRMAA) is an additional monthly premium you may have to pay for Medicare coverage. How much you pay depends on your modified adjusted gross income (AGI), which is impacted by any Roth conversions you do. Currently, the highest earners would have to pay an additional $487 per month for Part B and $91 per month for Part D. That is an extra $578 per person per month (so $1,156 monthly for a couple).

Social Security. The taxability of your Social Security benefit depends on your income level, which may be affected by any Roth conversions you make. If Social Security provides a significant part of your income, recognizing additional gains could potentially cause your benefit to go from 0% taxable to as much as 85% taxable.

Deduction Phaseouts. The One Big Beautiful Bill Act (OBBBA) introduced significant deductions, including the increased state and local tax (SALT) deduction and a new senior deduction. These deductions can be valuable, but they phase out at different income levels, so they all must be kept in mind when considering a Roth conversion.

2. Not Considering the 5-Year Rule

There is more than one five-year rule regarding Roth IRAs, and some people might be unaware that there is a five-year rule specifically governing Roth conversions. For each Roth conversion you do, there is a five-year waiting period that must pass before the earnings from that conversion can be withdrawn tax-free. If you are under 59.5, withdrawals within the five-year period would also be subject to a 10% penalty in addition to the earnings being taxable.

It’s important to remember that each conversion has its own five-year period. Withdrawals from conversion amounts are counted on a first-in, first-out basis, so the five-year rule will not impact everyone. But for those it does impact, the potential penalty and tax bill could be significant and need to be considered before doing any Roth conversion.

3. Not Considering Beneficiaries

If one of your financial goals is to leave money to family or charity, it is important to consider the tax situation of each of your beneficiaries. For example, if it is likely that a beneficiary will be in a lower-income situation when they receive an inheritance or gift, then it could make sense to be less aggressive with Roth conversions than you might normally be if you were considering only your situation. 

If you have any charities named as beneficiaries, remember that qualified charitable organizations do not have to pay taxes on pre-tax IRA funds they receive. Doing a Roth conversion on money earmarked for charity could just end up reducing the amount that the charity will ultimately receive, with no tax benefit.

4. Changing Your Mind

Roth conversions are forever. Before 2018, you were allowed to reverse a Roth conversion that you made earlier in the year, but the Tax Cuts and Jobs Act (TCJA) changed that. Now, you are not allowed to undo any Roth conversion you make.

If you are considering a Roth conversion but are unsure what your income will be for the year, it likely makes sense to delay the conversion until later in the year, when you have more clarity about your situation.

5. Not Paying Taxes from Outside Your IRA

Ideally, you should use funds outside your IRA to pay the tax due on a Roth conversion. This step may not always be possible, but it is usually better than withholding tax from the IRA distribution.

For example, consider an individual with $100,000 in a traditional IRA that he wants to convert to a Roth IRA. He initiates the conversion while withholding 25% from the traditional IRA for taxes. In this scenario, he would end up with $75,000 in his Roth IRA ($100,000 - $25,000). 

Now consider what it would look like if he paid the tax from a taxable investment account he owns, rather than withholding it from the traditional IRA. In this scenario, he would end up with $25,000 less in his taxable account, but he would have $100,000 in his Roth IRA. In addition to whatever tax benefit he received from doing the conversion, he also, in essence, shifted $25,000 from a taxable account to a tax-free Roth account.

6. Thinking That the Future Is Completely Predictable

At Eclectic Associates, we always value detailed analysis and the creation of projections, but we also caution against overconfidence when projecting into the future. Complicated forecasts are only as good as the assumptions going into them, so be especially wary of overly optimistic assumptions. Markets will be volatile. Life will throw you a curveball. Congress will change tax laws.

Doing Roth conversion analysis requires math and objectivity, but it is also important to consider practical wisdom and build in a margin of safety when making decisions that impact future years.

7. Waiting Too Long

If the idea of doing Roth conversion analysis feels overwhelming, remember that if you miss a year of recognizing income in a lower bracket, that opportunity is gone forever. Roth conversions must be done by December 31 of each year. After that, it is too late. Never getting around to doing a Roth conversion at all can be a pitfall, too! It is important to start proactive tax planning now. 

If you have questions about implementing a Roth conversion strategy for your unique situation, we are happy to help. Please feel free to schedule a complimentary phone call or meeting with one of our fee-only financial advisors.