Multi-Year Roth Conversion Planning Explained
Episode 49
Multi-Year Roth Conversion Planning Explained
Published on Aug 26th, 2026
Episode Summary
Episode 49 of Retirement Tax Matters breaks down why multi-year Roth conversion planning must be treated as an annual process rather than a static plan. Garrett and Adam address the common desire among retirees in the $2M to $8M range to establish a multi-year Roth Conversion plan, explaining how shifting tax laws, market movements, and income adjustments render long-term predictions less than reliable. The conversation outlines our framework we use with clients that moves from spring tax return reviews to fall income projections, ensuring current-year taxable income is accurately established before executing conversions. The show demonstrates how systematic, measured conversions can consistently fill lower tax brackets while maintaining flexibility if unexpected income changes or market drops occur.
Key Tax Planning Questions
Question 1: Can you do a multi-year Roth conversion plan on a project basis?
This is an email request I’ve received regularly through the years from high-net-worth retirees. People often reach out asking if they can engage our firm for a one-time project to build a defined period (ex. 5 year) Roth conversion schedule.
I understand why this request is so popular. For a household with a $2M to $8M portfolio, the golden window of retirement (the period between retirement and the start of Social Security at age 70 or Required Minimum Distributions at age 73 or 75) is a unique season where you have a lot of control over your taxable income. Having a financial planner build a Roth conversion plan to help you maximize that time period is a big value add.
However, executing a multi-year Roth conversion plan on a one-time project basis is hard to nail down. Why? Predicting your exact taxable income two to four years into the future is near impossible. A sudden decision to downsize a home, an unexpected distribution of realized capital gains from a mutual long-held fund, higher-than-anticipated portfolio dividends, or brokerage account rebalancing due to market forces can all push your Adjusted Gross Income (AGI) higher than a one-time project report anticipated.
Then you must take into consideration outside variables like changing tax legislation or health issues. If the stock market experiences a significant decline in a future spring, that creates a prime opportunity to execute an Roth conversion while equities are depressed. A five-year old “plan” printed years prior probably didn’t factor that in.
Whether you are a client or not, I believe Roth Conversions must be approached in a year-by-year basis, and for most people that happens in the fall as December 31st approaches. It’s good to have a long-term plan, but Roth conversions execution will be highly dependent on how the current year went.
Question 2: Is it too late to do a Roth conversion after starting RMDs?
When you are in the thick of retirement and already taking Required Minimum Distributions, it is easy to watch financial planners on YouTube and feel like you completely missed your window of opportunity for Roth conversions. Many retirees assume that the golden window between retirement and starting RMDs at age 73 or 75 was their only chance to move money into a Roth IRA. While you may have missed the chance to execute larger conversions at lower tax rates, I tell people all the time, especially married couples, that I do not think it is ever too late to convert measured amounts each year.
The main IRS rule to keep in mind once RMDs start is that the first dollars taken out of your Traditional IRA in any calendar year are legally considered your required distribution. You cannot convert an RMD directly to a Roth IRA. You have to satisfy your full mandatory distribution for the year first, and then any additional money you withdraw above that RMD amount is eligible to be converted.
Even if you are only converting smaller amounts on top of your baseline RMD, those numbers add up over time. I am a big believer that if you have $30,000 of remaining space before hitting the next Medicare IRMAA threshold or jumping from the 24% to the 32% marginal tax bracket married filing jointly, considering filling that bracket space over a decade moves $300,000 out of your pre-tax IRA and into a tax-free vehicle. Everyone’s situation is unique, but this kind of optimizing should be on everyone’s agenda to review if it’s a good fit.
When you factor in investment growth over the rest of your retirement, especially if one spouse lives into their 90s, that tax-free compounding makes a significant difference for your household. On top of that, when your children inherit a Roth IRA, they receive an additional 10-year tax-free growth window under the SECURE Act. Doing a small, measured conversion each year might not feel as exciting as converting half of your 401(k) overnight, but those annual tax return decisions add up to a big difference for a surviving spouse and your beneficiaries.
Full Episode Transcript
Adam: Good morning, and welcome to Retirement Tax Matters. I'm Adam Reed. This is Garrett Crawford, our resident CFP® professional. This morning, we wanted to go to the comment section and address some of the questions people have submitted online and pull from what you guys are talking about. We feel like if enough people are chattering about this, yapping about it, I think is what the modern term is for it, then maybe we should make an episode.
Garrett: It's our duty to answer the call, right?
Adam: We are podcasters of the people. You know, what you guys want, you get. The squeaky wheel gets the oil. There you go. So here is the oil this morning for you all: talking multi-year Roth conversion plans. If you scroll back through our episodes, we try to cover a lot of different ground and a lot of content, but just by the nature of what we do in financial planning, a lot of that touches on Roth conversions and some different things like that in year-to-year planning. A lot of times we talk about it, "Hey, when you're in this tax bracket, this is what it could look like." But we wanted to take a second and do a deeper dive into what it looks like to do Roth conversions over an entire retirement. As you guys can imagine, we're not going to cover every single person's situation today, but we will give some general rules of thumb, things that should be helpful for you as you're thinking through what it looks like for you from age 65 to 85 to convert to Roth. So again, we probably won't cover every single person's life and circumstances, but hopefully some general guidelines for what it could look like for you to put that together. So Garrett, what does that look like? And maybe touch first on what does it look like if someone wanted to work with us. I promise this isn't an ad for us; we'll talk about the do-it-yourselfers too. But how are we helping people do this each year, and what does that look like to have an ongoing relationship with a financial planner, us, or maybe another one that's doing tax return driven financial planning?
Garrett: Well, I think that's a great jumping-off point. Even as you were talking, I was recounting a couple of correspondences I've had with people that have tuned into our channel and emailed me. I think we can all be victim to this, where we get in our own bubble, we're around the people that we're around, and we really don't know what's better or different outside of our bubble. I've had a couple of people email me about Roth conversions, and I would say there's this universal desire for people where they are sensing that Roth conversions are a value-add. They say, "Hey, I know it's more than one. I know that I'm going to do this more than one time, and what I really want is a multi-year Roth conversion plan." I talk about that idea of a bubble because I think people that are tuning into these videos are inquisitive, you're on YouTube, and you're trying to learn things. That's not everybody's experience. And so these people that are emailing me are saying something like, "I watched your video on the difference between the 24% and 32% tax bracket and Roth conversions, and it got me thinking about Roth conversions. I've got an advisor, but they've never really talked about that." Or maybe they're still working and the excuse has been, "Well, I'm not retired yet, so I'm not thinking about Roth conversions." And so I think even you and I, and you came from a different part of the industry before you started working here, we can get in our bubbles there, too, where not all advisors even care about doing the tax planning and the Roth conversion planning that we're doing. But built into the very fabric of Roth conversions is this idea of a repeatable process where every single year you are looking at your opportunity to fill up your current year tax bracket. That needs to be another episode: what does it mean to top off or stack up and fill up your tax bracket? But there's this repeatable process where every year is going to be a little different, and there has to be an awareness of what is happening on your tax return. If you're not familiar with what's happening on your tax return, you're not going to be familiar with how much Social Security income is coming in, or pension income. Do they have rental property? And so you can't really do multi-year Roth conversion plans unless you have somebody that is deeply familiar with your income and financial situation. To zoom out a little bit, when we talk about a multi-year Roth conversion plan, I get a sense a lot of times when people first reach out to us, they're saying, "Hey, Adam, hey, Garrett, I've got $3 million in an IRA." To use an extreme example, "Should I convert that all to a Roth IRA this year?" There's going to be a tiny fraction, less than 0.2% of people that we ever interact with, where that would be something that we would entertain. But people think that. They think a Roth conversion is an all-or-none thing, or, "I've got $3 million in an IRA, maybe I need to convert a million and a half today to Roth." While that could be a possibility, I would say that a more tax efficient way to get to your goal is this idea of doing smaller Roth conversions on an annual basis. That can multiply the effects of good financial planning by paying attention to the tax brackets each year.
Adam: Yeah, and I think that's why we're so big on tax return driven financial planning and doing these year-end tax planning checklists for all of you do-it-yourselfers out there. Check that out on our website at the link below. You trade your email address for it, and as I say every week, it's the best value in the industry, even outside this industry. I don't know what somebody could give away for free that would top this, but I don't think they're doing it. So check it out. In most episodes I think it's relevant, but in this one, super relevant. Each year you're sitting down with your tax return from last year, you're making projections, making sure you're not missing anything using this tax planning checklist, and then you're making decisions based off of that, using the X-ray or the MRI of your financial audit from last year, looking at this year, and planning for next year. So Garrett, what does it look like for somebody that is wondering, "Should I go download this?" How do they utilize that to sit down and make these projections each year? And why do you not just pick a number and stick with it for the next 5, 10, 15, 20 years as a static number?
Garrett: Yeah, so as Adam pointed out with the year-end tax planning guide, we employ a seasonal approach, where in the early winter and spring, we are making sure that the financial planning that we've done the previous year actually ends up on the tax return. I just had one recently where a donor-advised fund did not get counted. That was an expensive oversight, and we caught it and fixed it. So making sure that the planning actually gets on the tax return is crucial. FYI, it's usually not the CPA's fault, but usually a communication error, a game of telephone. Once the tax return's filed, we're usually beginning the process of an income projection for the current year, because we have to know what your income is going to be on December 31st in order to proactively make these decisions about Roth conversions. Summer is a great opportunity to do other financial planning items outside of Roth conversion planning, but fall is what we like to think of as execution time. Summer is a little bit of a slower time around the office for Adam and me, but in the fall it kicks up. It's the end of August now, and September, October, and November get really busy because I'm retouching base with all clients, and we are dialing in Roth conversions and how to generate income more efficiently. I think that comes back to what you just mentioned about the method where maybe you're like, "Hey, I'll do $50,000 this year, I'll do $50,000 the next year, and the next year, and the next year." I would say one of the flaws of just picking a number for a Roth conversion is that it's kind of the lazy route. I see it employed by other advisors, and I see it employed by people doing it themselves. But your life is going to change year to year to year. With this idea of having a multi-year Roth conversion plan, I'll have people that want to meet and ask, "Hey, can we do a financial planning project where we build a multi-year Roth conversion plan for me?" I totally understand where that comes from, but I'll tell you anecdotally from my experience as a financial planner, I've got a lot of clients, and I know what they're going to do for a Roth conversion this year generally in August. I have no idea what next year is going to be for a Roth conversion. These are people that I work with and know deeply. I know their financial situation, but I never get into year two before year two has arrived. Why is that? Congress could change the rules next year. That happens. The economy could go south, and maybe next April the S&P 500 drops by 40%. That's a wonderful time to do it.
Adam: Well, thresholds are moving all the time. Your Social Security is getting a cost-of-living adjustment. There are so many moving parts. Maybe a one- or two-year plan makes sense, but looking 5 or 10 years out is almost like being blindfolded and trying to shoot a target 100 yards away.
Garrett: I just feel like that's inactionable for people to do. If you called me and said, "Hey, let me do a one-year plan," that's reasonable. But looking into 2027, I just don't feel confident that I'm going to be able to predict what life will look like next year. One of the things I like about ongoing multi-year Roth conversion planning is that I'll meet with people in the spring, we'll know that we want to do a $115,000 Roth conversion, and some clients will want to do that right away, get the planning done, and move on with their life. Other clients will say, "What if we kind of hang on to that number for the rest of the year? Because I might buy a car, I might pull some money out, and what if the market drops?" Having that in your pocket ready to go and knowing that you're going to do $115,000 allows you to be nimble and flexible with your Roth conversion planning. I love the idea of a multi-year Roth conversion plan, but the thought that you can predict that more than one year in advance is something I would push back against. My answer for our clients is using this year-end tax planning guide as an ongoing financial planning framework to build into those discussions we're having every year about their life changing, investments, distribution needs, and RMDs. Way more often than not, the Roth conversion amounts will fluctuate greatly each year. Sure, you can pick a number, maybe one year you decide it's $45,000 you want to do and you're just going to stick with it. I think you could do that, but you're going to run into Medicare IRMAA issues and net investment income tax issues for a lot of people, and I don't think that's the ideal way to do that.
Adam: Yeah. I think a good way for us to wrap up today's episode is encouraging people that you can do some big short-term Roth conversion strategies for a couple of years and say, "I'm going to do some big chunks" during years of artificially low income. That's great. I think sometimes the fear of doing everything can prevent somebody from doing something. Someone might say, "Well, I've got $3 million in an IRA. If I just convert $20,000 a year, is that really going to put a dent in things?" Our thought is that small, incremental decisions over 20 to 30 years can make a huge impact, not only on your life and your portfolio, but also on the people that are inheriting money from you. With the SECURE Act and different things like that, inheriting a Roth is a great thing to inherit. Our encouragement would be to do the planning, download the year-end tax planning checklist, do your projections, see where you land, try to fill up those tax brackets, and be mindful of different thresholds out there that will bite you a year or two down the road like IRMAA. Just commit to something and say, "Hey, I'm going to do it this year." Then next year, if you're tech-savvy, make a spreadsheet, copy those things over, and see how you did. In April, we always like to grade ourselves: "Oh, we nailed this one within $1,000," or "Oh, we missed a couple of things here, we didn't know about this account over here." Now we know. Tweaking that and dialing that in becomes more consistent over time. For clients we've worked with for years, we know what's going to be coming in and what to ask about. While we may not feel confident saying, "Hey, we're going to do a 5- or 10-year plan right now and commit to it," we do feel more confident each year knowing a client's Social Security, RMDs coming in, or big annual QCDs. So we get more confident, and I think you guys will do the same thing. The year-end tax planning checklist is a great way to build confidence and put guardrails and reminders in place for you to get the ball rolling on that.
Garrett: Just to double-click here, Adam and I are financial planners who work with clients. Some people reach out and work with us, but we also know a lot of people out there are not looking for a financial planner; they're looking to learn. The big idea I'd want somebody to walk away from this episode with regarding multi-year Roth conversions is that it's not a one-time event, this is a process that you have to get into. Whether it's with a financial planner like Adam and me, or on your own, every year you need to review taxes, tax legislation, tax brackets, and current health. Whatever season it is, spring, winter, fall, have a process to evaluate what new amount for a Roth conversion makes sense.
Adam: Yeah, absolutely. The year-end tax planning checklist is great for a lot of you who are really smart. We see you in the comments and interact with you. Building a multi-year Roth conversion plan is a great idea, and just starting somewhere, grading yourself the next year, and making tweaks and adjustments year after year is a great idea that would serve a lot of our listeners really well, whether you do it on your own as a DIYer or work with someone like us. So we appreciate you guys listening in today. Multi-year Roth conversions, we're going to think of as many ways as we can to talk about Roth conversions, Adam, because we love them.
Garrett: We might talk about them again in the future. What do you think?
Adam: Yeah, tune in! There might be an episode down the road about Roth conversions, but we like them. We think they're a really cool tool to have in the tool belt, not a perfect fit for everybody, but a good tool to have. We appreciate you all listening in. Check out the newsletter and the free year-end tax planning checklist on the website. I'm Adam Reed. Garrett Crawford. We're Retirement Tax Matters.
Garrett: See you next time.