Ask the experts: Is now the time for this retirement move?

We asked 14 financial experts if it’s the right time to convert your retirement savings. Most say low tax rates make it a great time to make the move.

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Hanna Horvath, CFP®

Hanna Horvath, CFP®

CERTIFIED FINANCIAL PLANNER™ & former Managing Editor, Growth

Hanna Horvath is a CERTIFIED FINANCIAL PLANNER™ and former managing editor for growth at Policygenius. She helped produce the Easy Money newsletter. She passed her exam to become a CERTIFIED FINANCIAL PLANNER™ in November 2020.

Hanna's work has appeared in NBC News, Business Insider and Inc. Magazine. She is regularly quoted in top media outlets, including CNBC, Best Company and HerMoney. She has also appeared on the Money Moolala podcast and All's Fair podcast.

Prior to Policygenius, Hanna wrote for KNBC in Los Angeles and WNBC in New York. When she isn't writing, she's (often) running, (usually) cooking and (sometimes) doing photography.

Published March 17, 2021|3 min read

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Covid-19 has upended many workers’ retirement plans, and some savers may be looking for ways to protect their nest egg. One option is converting a traditional individual retirement account to a Roth IRA. You’ll pay taxes on the lump sum, but all contributions in the future can grow and be withdrawn tax-free. This may be attractive because tax rates are at historic lows and there’s talk of tax increases in the future. It may be smart to capitalize on low rates — but is now the right time? 

We asked 14 financial experts if it’s the right time to convert your retirement savings. Most say low tax rates make it a great time to make the move. 

Learn more about how Roth conversions can save you money here.

Should you do a Roth conversion right now?

Why some experts think you should do a Roth conversion

“If someone is in a lower tax bracket than they anticipate to be in the future, Roth conversions are a great idea. The first part of the year is generally a good time to consider it, since the markets are generally higher at year end than in the beginning of the year. Undoubtedly tax rates are lower than they'll be in the future, whether a tax bill is passed in 2021 or not.” 

— Matthew Benson, certified financial planner at Sonmore Financial

“Now is a good time to do a Roth IRA conversion because there’s potential for higher taxes in the future. Paying for the conversion at a lower rate now may pay off tremendously in the long run. Also, if your estate and legacy plans involve leaving retirement assets to beneficiaries, leaving Roth assets are much more tax-efficient than ever over traditional tax-deferred assets. This is in large part due to the SECURE Act doing away with the stretch IRA for many beneficiaries.”

— Justin Poplawski, certified financial planner at Bleakley Financial Group 

“2021 could be a great year for Roth conversions, if your income will be lower than normal this year, and you think tax rates are going up next year. It's better to pay some tax now versus later at higher rates.”

— Nate Wenner, certified financial planner at Wipfli Financial Advisors 

“Roth conversions are a great tool for managing or lowering a household's lifetime tax liabilities! It’s also great to have a bucket of tax-free money to draw from, so you don't have to draw from a tax-deferred account and inadvertently raise your tax liabilities at a bad time.”

— Tim Doehrmann, certified financial planner at Eagle Ridge Wealth Advisors 

Why some experts think you should hold off 

“My rule of thumb for Roth conversions is either after your portfolio has gone down significantly, for instance 20%, or at the end of the year. This is because you can no longer re-characterize a Roth conversion and you’ll feel pretty bad if the market drops significantly after you decide to do the conversion. You will have to pay more tax than if you had delayed the conversion. The other reason to wait for the end of the year is to be able to examine your tax situation to see if you want to take that extra income. If the extra income pushes you over a threshold in the tax code, maybe you would not want to convert this year or at least convert a smaller amount.”

— David Haas, certified financial planner at Cereus Financial Advisors  

“The passage of the SECURE Act, which eliminated the IRA stretch strategy for most beneficiaries, has made Roth conversion a little less attractive. There are so many variables that need to be considered, that making any Roth conversion decision has to be done on a case-by-case basis.”

— Michael Peterson, certified financial planner at Faithful Steward Wealth Advisors

“Roth conversions only make sense long term if you are in a low tax bracket temporarily, such as just starting out in your career, or have unusually low income one year. You can't be sure of that yet.”

— Robert Braglia, certified financial planner at American Financial & Tax Strategies

Graphic: Nastia Kobzarenko