Discussions about Roth conversions have increasingly captured attention in financial media. From television broadcasts to seminars and newsletters, the prevailing advice has been to execute conversions while tax rates remain favorable. The urgency surrounding this issue stemmed from the Tax Cuts and Jobs Act of 2017 (TCJA), which not only reduced federal income tax brackets but also established a deadline for converting traditional Individual Retirement Accounts (IRAs) to Roth IRAs before 2025.
This summer, however, the legislative landscape shifted dramatically when Congress passed the One Big Beautiful Bill Act of 2025 (OBBBA), making the lower tax brackets from the TCJA permanent. This change alters how individuals, particularly those nearing retirement or over 60, should approach their financial strategies regarding Roth conversions.
Understanding the implications of permanent tax brackets
Previously, the looming end of lower tax rates prompted many to expedite their conversions. The guiding principle was straightforward: transfer as much as possible from traditional IRAs to Roth IRAs to secure low tax rates before the countdown to December 31, 2025, reached zero. The advantages of Roth accounts were evident: tax-free withdrawals after retirement, no required minimum distributions (RMDs), and tax-free growth of earnings.
Shifting from urgency to strategy
With the OBBBA ensuring that lower tax brackets will remain, the frantic rush to convert is no longer necessary. This newfound stability allows individuals to adopt a more measured and strategic approach to Roth conversions. Instead of hurrying, individuals can now consider a gradual conversion process that aligns more effectively with their long-term tax strategies.
This shift is especially beneficial for those approaching retirement. The onset of RMDs can significantly increase taxable income, potentially pushing retirees into higher tax brackets in their 70s and 80s. By proactively reducing the balance in traditional IRAs before RMDs begin, individuals can mitigate the impact of these income spikes.
Planning for the future: a comprehensive approach
Another critical consideration for married couples involves the tax implications that arise upon the death of one spouse. While many couples file jointly during their lifetimes, the surviving spouse may find themselves filing as single, which can substantially increase their tax liability even with the same income level. By converting traditional IRA balances to Roth IRAs earlier, couples can lessen the financial burden of this transition.
Maintaining a mix of account types—traditional, Roth, and taxable accounts—can enhance financial flexibility. This diversification allows individuals to select from different accounts when withdrawing funds, optimizing their tax situations annually. Additionally, when passing on wealth to heirs, Roth IRA assets are often preferred due to their tax-free withdrawals for beneficiaries, a significant advantage over traditional IRAs.
The long-term perspective
While the benefits of Roth conversions are compelling, they are not guaranteed. Tax laws can change, and the decision to convert should be part of a broader financial strategy. The years between retirement and the start of RMDs present unique opportunities for executing partial Roth conversions without dramatically increasing taxable income.
With the OBBBA alleviating concerns about rising taxes post-2025, individuals can shift their focus toward personalized financial strategies. Developing a multi-year plan enables a forward-looking perspective on tax liabilities, allowing for adjustments based on income fluctuations over time.
Yearly reviews and adjustments
Regular evaluations of Roth conversion strategies can be beneficial, especially in the last months of the tax year when clearer financial insights emerge. Many individuals choose to reassess their conversion plans around November or December, considering their likely Modified Adjusted Gross Income (MAGI) and how different amounts converted might affect their tax brackets.
This summer, however, the legislative landscape shifted dramatically when Congress passed the One Big Beautiful Bill Act of 2025 (OBBBA), making the lower tax brackets from the TCJA permanent. This change alters how individuals, particularly those nearing retirement or over 60, should approach their financial strategies regarding Roth conversions.0
This summer, however, the legislative landscape shifted dramatically when Congress passed the One Big Beautiful Bill Act of 2025 (OBBBA), making the lower tax brackets from the TCJA permanent. This change alters how individuals, particularly those nearing retirement or over 60, should approach their financial strategies regarding Roth conversions.1
This summer, however, the legislative landscape shifted dramatically when Congress passed the One Big Beautiful Bill Act of 2025 (OBBBA), making the lower tax brackets from the TCJA permanent. This change alters how individuals, particularly those nearing retirement or over 60, should approach their financial strategies regarding Roth conversions.2