Should You Convert To A Roth IRA Before Retiring? One Couple Faces A $38,000 Question

Caroline Lubinsky

Tue, August 4, 2026 at 11:31 PM GMT+3 7 min read

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A couple approaching retirement is weighing a decision that could significantly affect both their taxes today and their retirement income in the future.

The husband wants to convert a portion of their traditional self-directed IRA into a Roth self-directed IRA, believing the upfront tax cost could pay off over time through tax-free qualified withdrawals. His wife, however, worries that triggering an estimated $38,000 tax bill just a couple of years before retirement could put unnecessary strain on their finances.

The debate highlights a question many retirees eventually face: Is paying taxes now worth the potential benefits later?

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Why Pay Taxes On Purpose?

A Roth conversion moves money from a traditional IRA into a Roth IRA. The amount converted is generally treated as taxable income in the year of the conversion.

In exchange, future qualified withdrawals from the Roth IRA—including investment earnings—can generally be received tax-free if IRS requirements are met.

For investors who expect assets such as real estate or other alternative investments to appreciate over time, converting before much of that appreciation occurs may allow more future growth to take place inside the Roth IRA.

The tradeoff is straightforward: paying taxes today in exchange for the potential for tax-free qualified withdrawals later.

Why Waiting Until Retirement Changes The Math

Timing can play an important role in deciding whether a Roth conversion makes sense.

Many financial professionals suggest paying the tax bill with money held outside the IRA whenever possible. Using retirement assets to cover the taxes reduces the amount that can continue growing in the Roth account.

The couple also needs to consider how the conversion affects their current tax bracket and whether adding the converted amount to this year's taxable income could increase their overall tax liability.

With retirement only a few years away, having enough non-retirement assets available to cover an estimated $38,000 tax bill is an important part of the decision.

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Does It Have To Be All At Once?

Not necessarily.

Some financial professionals recommend spreading Roth conversions over several years instead of converting a large balance all at once. Partial conversions can sometimes help investors manage taxable income by staying within a targeted tax bracket each year.

Whether that approach makes sense depends on the couple's overall financial picture, including expected retirement income, future tax rates, and long-term planning goals.

What If The Investment Doesn't Perform?

Expected investment growth is one factor in evaluating a Roth conversion—but it isn't the only one.

If investments appreciate substantially after the conversion, more of that future growth may ultimately qualify for tax-free withdrawals. If returns are lower than expected, the benefit of paying taxes upfront may be reduced.

Investors also consider other factors, including the ability to diversify future tax exposure and the fact that Roth IRAs are not subject to required minimum distributions (RMDs) during the original owner's lifetime under current IRS rules.

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The Decision Comes Down To More Than The Tax Bill

Because Roth conversions affect taxes, retirement income, and long-term financial planning, many investors choose to model multiple scenarios before making a decision.

Working with a qualified tax professional or financial advisor can help estimate how different conversion amounts could affect current taxes, future retirement withdrawals, and overall financial goals.

For investors using alternative assets, Advanta IRA administers both Traditional and Roth self-directed IRAs and provides educational resources about Roth conversions and self-directed retirement accounts.

Questions To Ask Before Converting

Every Roth conversion involves balancing today's tax cost against tomorrow's potential benefits.

Questions worth considering include:

Can the tax bill be paid with non-retirement assets?
Would a partial conversion make more sense than converting everything at once?
How might the conversion affect this year's tax bracket?
How long is the expected investment time horizon?
What role do future required minimum distributions play in the overall retirement strategy?

The right answer depends on each investor's financial situation, retirement timeline, and long-term objectives. A Roth conversion can be a valuable planning tool for some households—but it works best when evaluated as part of a broader retirement strategy rather than as a standalone tax decision.

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This article Should You Convert To A Roth IRA Before Retiring? One Couple Faces A $38,000 Question originally appeared on Benzinga.com