When a Roth conversion may not be worth it.

Roth is not a magic word

Tax-free growth is attractive. But a conversion also means paying tax now, accepting current assumptions, and giving up the future use of the tax-payment dollars.

Reasons to be cautious

• The conversion pushes income into a bracket you do not want to fill.
• The tax payment would weaken your cash reserve.
• You may need the converted funds soon.
• The conversion could trigger other income-based costs.
• Your future withdrawal tax rate may be lower than today’s conversion rate.

A better question

Instead of asking, “Is Roth good?” ask, “At this conversion amount, under these assumptions, what must be true for the conversion to beat doing nothing?”

The Roth conversion planner is built around that question. It computes the rate paid now on each slice of a conversion, compares it with three possible future rates, including a surviving spouse’s, and when none of them is higher, it says so. Then it runs a conversion plan through the whole household against doing nothing — required distributions, Social Security taxation, Medicare surcharges, and the growth given up by the money that pays the tax — and a plan can finish behind even when those rates say converting is worth it.