Roth Conversion Risks: Why It Might Not Be The Best Move For Your Financial Future

You’ve probably heard that converting your Traditional IRA to a Roth IRA could save you money in taxes down the road. But what if I told you that for some people, it might not be the best move?

Before making any decisions, let’s go over some important reasons why a Roth conversion may not be right for you." This is the topic we will be focusing on in today’s coffee and cash video.

Reason #1 – You’ll Face a Big Tax Bill Now

When you convert a Traditional IRA to a Roth, you owe taxes on the entire amount you move over. This could mean thousands of dollars in additional income tax this year.

If you don’t have extra savings to cover that tax bill outside of your IRA, you might have to dip into your retirement savings just to pay the IRS—reducing the long-term growth of your investments."

Reason #2 – You’re Close to Retirement

If retirement is just around the corner, you may not have enough time for a Roth conversion to pay off.

Since Roth IRAs grow tax-free, the biggest advantage comes from giving your money time to compound. If you’re planning to withdraw funds soon, paying taxes now might not be worth it."

Reason #3 – You Expect a Lower Tax Rate in Retirement

If your tax rate will be lower in retirement than it is today, converting now means you’re paying taxes at a higher rate than necessary.

For example, if you're in the 32% tax bracket now but expect to be in the 12% or 22% bracket later, you could save money by keeping your Traditional IRA and paying lower taxes on withdrawals in the future."

Reason #4 – You May Have High Medical or Long-Term Care Costs

As we age, medical and long-term care expenses often increase. The good news? These expenses are deductible on your tax return if they exceed a certain percentage of your income.

That means if you use money from a Traditional IRA to pay for these costs, you could end up reducing or even eliminating the taxes on those withdrawals. Since Roth IRA withdrawals are already tax-free, you lose this potential tax advantage.

Reason #5 – You Plan to Leave Money to Charity

If you plan to donate part of your IRA to charity, keeping it as a Traditional IRA may be the smarter move.

Why? Because charities don’t pay income taxes. So if they inherit a Traditional IRA, they receive 100% of the funds—without taxes eating into the gift. In this case, converting to a Roth doesn’t provide any added benefit.

Reason #6 – You Can Do a Partial Conversion Instead

One mistake people make is thinking they have to fully convert their Traditional IRA all at once. But that’s not true.

A large conversion could push you into a higher tax bracket, meaning you’d pay more taxes than necessary. Instead, you could convert just enough each year to stay in a lower tax bracket—maximizing your tax savings over time.

As you can see, a Roth conversion isn’t a one-size-fits-all decision. It really depends on your personal situation—your tax bracket, your retirement timeline, and your future expenses.

The good news? You don’t have to decide all at once. You can convert a portion now and wait on the rest—or decide that keeping your Traditional IRA is the best move for you.

If you’re unsure about what’s right for you, let’s talk. I can help you weigh the pros and cons based on your unique situation.

Thanks for watching, and I’ll see you next time!