When to Consider a Roth Conversion: 3 Common Scenarios

When it comes to planning for retirement, Roth conversions can be a powerful tool that allow you to amplify your savings and optimize your long-term tax strategy. But how do you know if a Roth conversion is the right move for you, and when is the best time to make the switch?

Here are three scenarios where you might be able to use Roth conversions to your advantage:

1. Embracing Change: Mid-Life Career Transition

This situation is not unusual for a young professional in their late 20s to early 40s who is undergoing a career change. Chasing a new passion or pursuing a different role may lead to a temporary dip in income, which can impact your overall tax liability. That's where a Roth conversion comes into play.

What's in it for You?

• Tax-Free Growth: Converting to Roth when you're younger allows you to sit back and watch your savings grow tax-free without Uncle Sam coming for his share when you're ready to retire.
• Strategic Tax Management: When you're in a lower tax bracket, converting some of your retirement savings to Roth can be a savvy way to cut down on taxes paid over the course of your lifetime.
• No Required Minimum Distributions (RMDs): Unlike traditional accounts, Roth IRAs don't come with mandatory withdrawals, giving you more control over your income during retirement.¹

2. Bridging the Gap: Early Retirement Before Social Security

If you've retired early with comfortable savings but little to no taxable income, the years before you start receiving Social Security benefits are a prime opportunity to consider adding Roth conversions into your financial game plan.

What's in it for You?

• Lower Tax Brackets: Converting retirement accounts to Roth during years in which you have a lower income can help you avoid paying more in taxes down the line.
• Reduce Your Future Tax Burden: Reducing the balance in your traditional retirement accounts may help you decrease your future tax exposure and manage RMDs with ease.
• Tax-Free Withdrawals: With Roth IRAs, future withdrawals are tax-free! This means more financial freedom and increased flexibility during your retirement years—so you can focus on enjoying the life you've earned, not worrying about taxes.^2,3

3. Crafting a Legacy: Strategic Conversions in Retirement

If you're already retired but are holding off on Social Security to maximize your benefits, consider how Roth conversions could help you elevate your tax and estate planning strategy.

What's in it for You?

• Lower Tax Brackets: Converting retirement accounts to Roth during years in which you have a lower income can help you avoid paying more in taxes down the line.
• Reduce Your Future Tax Burden: Reducing the balance in your traditional retirement accounts may help you decrease your future tax exposure and manage RMDs with ease.
• Tax-Free Withdrawals: With Roth IRAs, future withdrawals are tax-free! This means more financial freedom and increased flexibility during your retirement years—so you can focus on enjoying the life you've earned, not worrying about taxes.^2,3

Let's Get Started

Roth conversions can be a game-changer in your financial strategy but crafting a solid retirement plan still requires thoughtful consideration and careful planning. Whether you're navigating a career transition, adjusting to early retirement, or prolonging your full retirement age to maximize Social Security benefits, a Roth conversion strategy could help you reach the retirement you deserve.

At Guardian Wealth Management, we recognize that everyone's financial journey is unique. Our team is here to help you navigate effective retirement strategies and smart investment tactics that align with your financial goals. Book a complimentary consultation today and let’s explore how Roth conversions can help you elevate your financial strategy.

¹“Retirement topics - Required minimum distributions (RMDs)” IRS.gov, August 20, 2024.
²“IRA rules for RMDs & other withdrawals” Vanguard, 2024.
³Consult with a financial or tax professional to determine if you qualify for tax-free withdrawals from your Roth accounts.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Investment advisory services are offered through Guardian Wealth Management, an SEC Registered Investment Advisor.