The Smart Money Moves You're Probably Not Making: Roth Strategies
Roth Conversions
The first strategy I’m going to talk about is called a Roth conversion, and here's the simple version: you move money from your traditional retirement account (where you'll pay taxes later) into a Roth account (where qualified withdrawals may be tax-free). Yes, you pay taxes now when you convert, but you may pay less overall depending on your tax rates, timing, and other factors.
The idea is simple: pay taxes when your rate is low, not when it's high. The catch? You can't perfectly predict your future tax rate. (This is one area where doing a financial plan can shine).
The Basics: Two Types of Retirement Accounts
Traditional 401(k)/IRA: You get a tax break now, pay taxes later when you withdraw in retirement.
Roth 401(k)/IRA: No tax break now, but your money grows tax-free forever. Qualified withdrawals are generally tax-free (withdrawals on growth before you are 59½ are not tax-free).
Roth conversion: Moving money from traditional → Roth. You pay taxes on the amount you convert this year, but then it's tax-free as it grows in the Roth account.1
When NOT to Convert
Skip Roth conversions if:
You'll be in a lower tax bracket later. If retirement income will be much lower than now, wait and pay less tax later.
You need the money within 5 years. There's a 5-year waiting period to avoid penalties on the converted funds.5
You don't have cash to pay taxes. Don't use the retirement money itself to pay the increased tax bill; in part, this defeats the purpose (especially for those under 59½, where the tax withholding will be penalized as an early distribution).
Your health insurance costs are affected more than the tax benefit of the conversion. Conversions count as income and can reduce ACA subsidies, and may push you into a higher IRMAA bracket if you are on Medicare.6
Quick Action Steps
Check your current tax bracket. Will it be higher or lower in retirement?
Determine how much. You don't have to convert everything, and should base the amount you convert on your tax estimates.
Time it right. Many people wait until Q4 to see their full-year income before converting.
Remember: no take-backs. You can't reverse a Roth conversion after 2018 tax law changes.10 Make sure you're confident before doing it.
You can convert a little each year or a lot—whatever makes sense for your situation.2
There’s More: Mega Backdoor Roth
The second Roth strategy applies if you max out your 401(k) and want to save even more tax-free. The mega backdoor Roth lets you contribute up to $47,500 extra (in 2026) to a Roth account.11,12
How it works:
Regular 401(k) limit (ignoring the additional ‘catch-up’ for those 50+): $24,500
Total contribution limit (including employer match): $72,000
The gap between these? You can fill it with "after-tax contributions"
Then immediately convert those to Roth
Requirements:
Your employer's 401(k) must allow after-tax contributions
Your plan must allow in-service conversions or withdrawals13,14
Common at big companies
Example: You contribute $24,500, your employer adds $4,500 match. That's $29,000 total. You can add another $43,000 as after-tax contributions and convert to Roth, giving you nearly $72,000 in retirement savings for the year.
Tax tip: Convert the after-tax contributions frequently to avoid taxes on earnings. Many plans do this automatically.15
Check with your HR department to see if your plan offers this option.
Benefits of Roth Accounts
Beyond saving on taxes, Roth accounts give you:
No forced withdrawals. Traditional IRAs have ‘Required Minimum Distributions’ (RMDs) which require you to start taking money out once you reach the required age.3 Roth accounts don't.
Flexible retirement planning. Roth withdrawals don't count as taxable income, so they won't increase your Medicare costs or affect Social Security taxes.4
Better for heirs. Your beneficiaries inherit Roth accounts tax-free.
Bottom Line
Using Roth accounts effectively may save you thousands in taxes over your lifetime, but the key is timing.
Best candidates for Roth Strategies:
Between jobs or careers
Early retirees (ideally before Social Security & RMDs)
Anyone in an unusually low tax year
High earners who can do a mega backdoor Roth
Now that you know these options exist, pay attention to your income each year. When you spot a low-income window, you may have an opportunity to convert at a lower rate if it aligns with your tax and planning considerations.
Next step: Talk to a financial planner with experience with software to see if a conversion makes sense for your situation this year, or in the near future.
This article is for educational purposes only and should not be considered tax or financial advice. Individual circumstances vary, and you should consult with a qualified financial planner or tax professional before making decisions about Roth conversions.
Sources and References
Internal Revenue Service. "Publication 590-B (2026), Distributions from Individual Retirement Arrangements (IRAs)." https://www.irs.gov/publications/p590b
Vanguard. "Is a Roth IRA conversion right for you?" Vanguard Investor Resources & Education. https://investor.vanguard.com/investor-resources-education/iras/ira-roth-conversion
Internal Revenue Service. "Retirement topics - Required minimum distributions (RMDs)." Updated January 29, 2026. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
Charles Schwab. "Required Minimum Distributions: What's New in 2026." https://www.schwab.com/learn/story/required-minimum-distributions-what-you-should-know
Lord Abbett. "Quick Answers: The Five-Year Rule and Important Info on Roth IRA Conversions." August 7, 2024. https://www.lordabbett.com/en-us/financial-advisor/insights/retirement-planning/quick-answers-the-five-year-rule-and-important-info-on-roth-ira-.html
Vision Retirement. "Roth IRA Conversions: Rules, Restrictions, and Taxes." January 2026. https://www.visionretirement.com/articles/investing/basics-of-roth-ira-conversions
Fidelity. "Qualified Charitable Distributions (QCDs)." https://www.fidelity.com/retirement-ira/required-minimum-distributions-qcds
Internal Revenue Service. "IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill." October 9, 2025. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
Tax Foundation. "2026 Tax Brackets and Federal Income Tax Rates." February 11, 2026. https://taxfoundation.org/data/all/federal/2026-tax-brackets/
Internal Revenue Service. "Publication 590-B (2026), Distributions from Individual Retirement Arrangements (IRAs)." https://www.irs.gov/publications/p590b
Internal Revenue Service. "Retirement topics - 401(k) and profit-sharing plan contribution limits." Updated January 2026. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
Empower. "Mega Backdoor Roth: How It Works and Its Benefits." 2026. https://www.empower.com/the-currency/money/mega-backdoor-roth
Fidelity. "What is a mega backdoor Roth?" February 28, 2025. https://www.fidelity.com/learning-center/personal-finance/mega-backdoor-roth
NerdWallet. "Mega Backdoor Roths: How They Work, Limits." Updated February 2, 2026. https://www.nerdwallet.com/retirement/learn/mega-backdoor-roths-work
Internal Revenue Service. "Rollovers of after-tax contributions in retirement plans." https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans
