The type of IRA your money is in matters. With traditional IRAs, you don't pay taxes upfront but defer them until later. With Roth IRAs, you pay taxes on your contributions but don't have to pay taxes afterward.
Roth IRA conversions allow you to move the money from a traditional IRA into a Roth IRA. The catch is that you must pay taxes to enjoy tax-free growth over the long term.
Is 2026 the right year to do a Roth conversion? Here's how to decide.
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A four-step process for deciding
Follow these five steps to decide if a Roth conversion this year is a good move for you:
1. Consider your current and future tax brackets
Do you expect higher or lower income in the future compared to the present? If your answer is "higher," converting a traditional IRA to a Roth IRA in 2026 could be a smart move to lower your long-term tax burden. Keep in mind that with a traditional IRA, you'll have to eventually pay required minimum distributions (RMDs) that could potentially bump you up to a higher tax bracket. Anyone born between 1951 and 1959 must begin taking RMDs at age 73, while the age threshold rises to 75 for anyone born in 1960 or later.
2. Evaluate market conditions
If the stock market declines sharply this year, a Roth conversion could become more advantageous. Why? You could pay lower taxes on a Roth conversion when your portfolio value is lower.
3. Make sure you have enough cash to pay the conversion-related taxes
Only proceed with a Roth conversion if you have enough cash on hand to pay the resulting taxes. If paying additional taxes in 2026 would be a financial burden, it might be better to hold off.
4. Consider estate-planning benefits
If you want to make things easier for your heirs, a Roth conversion in 2026 could be more appealing to you. Roth IRAs pass down to your heirs tax-free. They also don't involve RMDs as traditional IRAs do.
No one-size-fits-all answer
You've probably seen that there is no one-size-fits-all answer to whether or not 2026 is the right year to do a Roth conversion. The best timing for a Roth conversion depends on multiple factors that will almost certainly be different for you than for someone else. Crunch the numbers for yourself and/or consult a trusted financial planner to make the right decision for you and your family.
