By Richard Scarpelli

Among the most common retirement account types are individual retirement accounts (IRAs), both traditional and Roth. A traditional IRA is a retirement savings account in which contributions may be tax-deductible at the time of contribution and taxes are paid on withdrawals in retirement. A Roth IRA is a retirement savings account where contributions are made with after-tax dollars and qualified withdrawals in retirement are tax-free.

These differences may make contributing to one type of account or the other more advantageous for certain individuals. Depending on an investor’s circumstances, it may make sense to consider converting a traditional IRA to a Roth IRA at some point.

For example, high earners whose modified adjusted gross income (MAGI) exceeds a certain threshold and who otherwise may not qualify for a Roth IRA may want to convert a traditional IRA to a Roth IRA to take advantage of tax-free withdrawals in retirement, especially if they expect to be in a higher tax bracket later in life. Converting also allows for greater flexibility, since Roth IRAs don’t have required minimum distributions (RMDs) during the account holder’s lifetime.

Converting a traditional IRA to a Roth IRA is a significant decision that requires careful planning. In this article, we’ll touch on several factors to consider – including the potential advantages and disadvantages of conversion – if you’re thinking about taking this step.

Pros and cons to consider if you are weighing converting your traditional IRA to a Roth IRA

One common reason people convert from a traditional IRA to a Roth IRA is because their MAGI is over a certain amount, which makes them ineligible to contribute to a Roth IRA. In 2026, these amounts are $168,000 for single taxpayers and $252,000 for joint filers.¹

If you are a high-income earner who would still like to take advantage of tax-free withdrawals in the future, you may be able to use a strategy known as a “backdoor” Roth IRA. This strategy allows high-income earners to bypass the income limits for direct Roth IRA contributions by making a nondeductible contribution to a traditional IRA, then converting the account to a Roth.

There are several reasons why one may want to consider the conversion from a traditional IRA to a Roth IRA, from seeking greater tax diversification to making it easier to pass money on to heirs. It’s important to first weigh the trade-offs, though; here are some potential advantages and disadvantages to think about before converting.

Advantages of conversion

• Tax-free growth: Roth IRAs offer tax-free growth and withdrawals, which can be advantageous if tax rates increase or you end up in a higher tax bracket in the future.
• No RMDs: Roth IRAs don’t impose RMDs during the account owner’s lifetime, which can facilitate more flexible retirement planning.
• Beneficiary benefits: Nonspousal beneficiaries can inherit a Roth IRA and withdraw funds tax-free, providing an advantage over traditional IRAs.

Disadvantages of conversion

• Immediate tax liability: The conversion from a traditional IRA to a Roth IRA triggers an immediate tax liability. This effectively pulls forward to the current year taxes that might not otherwise be due until many years in the future.
• Potential to be pushed into a higher tax bracket: The conversion may push the individual into a higher tax bracket.
• Potential need for external funds: Paying the tax liability from assets outside the IRA can help preserve the growth potential of the Roth IRA, but doing so requires sufficient liquidity.
• Beneficiary considerations: If your beneficiary is a charitable entity, you’d generally owe income tax on the conversion, while the charity can usually inherit a traditional IRA without paying income tax.

It’s worth noting that Roth IRAs are subject to a five-year rule before withdrawals of your investment earnings become tax-free – meaning the account must be open for at least five years after your initial contribution. The clock starts on January 1 of the year you make your first contribution.

If the account owner dies within five years of converting, their beneficiaries can still withdraw the money put in (and the converted amount) tax-free. However, any earnings taken out may be taxable until the five years are up. The usual 10% early withdrawal tax does not apply to beneficiaries of inherited IRAs, even if the conversion was recent.

Tax implications for converting a traditional IRA to a Roth IRA

A Roth conversion generally triggers ordinary income tax in the year you convert. The amount converted from a pre-tax traditional IRA is added to your taxable income. That extra income may push you into a higher marginal bracket and may affect other items tied to adjusted gross income (AGI) – such as phaseouts and credits, the taxability of Social Security, Medicare premium surcharges (IRMAA) and even the 3.8% Net Investment Income Tax (NIIT) – depending on your situation.

If you have pre-tax dollars in any IRA and after-tax (nondeductible) basis in any traditional IRAs, the IRS applies the pro-rata rule across all your IRA accounts combined, meaning you cannot convert just the after-tax dollars. The conversion will be taxed based on the percentage of pre-tax versus post-tax money in all your IRA accounts.

One of the challenges with a Roth conversion is finding enough funds outside of the converted amount to pay the tax. Withholding taxes from the conversion reduces the amount that can make it into the Roth, and, if you’re under 59½, withheld amounts can be treated like a distribution and potentially subject to a 10% early-withdrawal tax. One of the factors to consider is whether there are nonretirement funds available to pay the tax and when you may need to increase withholding or make estimated payments to avoid underpayment penalties.

Once your IRA is converted to a Roth, qualified withdrawals in retirement may be tax-free, so long as you are age 59½.

Roth IRA conversion versus no conversion: Three real-world scenarios

[The following examples are hypothetical, for illustration only, and do not reflect actual client experience, fees, taxes (beyond what is stated), inflation, or market conditions. Results will vary.]

Let’s consider three different scenarios. In each scenario, John, age 50, has a traditional IRA worth $100,000. He expects to be in a higher tax bracket in retirement and is considering converting to a Roth IRA. Keep in mind that because John is under 59½, if he uses IRA funds to pay the taxes owed on the conversion, he will incur a 10% early withdrawal tax on the amount withdrawn.

Traditional IRA to Roth IRA conversion: Taxes paid using other assets

If John converts his entire IRA, he will pay taxes on the $100,000 at his current tax rate. Assuming a 24% tax rate and assuming that the $100,000 does not push him into a higher bracket, he’ll owe $24,000 in taxes on top of his existing tax liability. He plans to pay the tax using liquid assets outside the IRA in order to preserve the full growth potential of the account. If the Roth IRA grows at an average annual rate of 6%, the funds in the account will double approximately every 12 years, reaching about $200,000 by the time John is 62 and about $400,000 by the time he’s 74. While John doesn’t have to take RMDs from the Roth account, any withdrawals he takes would be tax-free so long as he meets the five-year rule.

Traditional IRA to Roth IRA conversion: Taxes paid out of converted amount

If John converts his IRA but pays the tax out of the converted amount, he would owe $24,000 plus a $2,667 tax (the 10% additional tax is also assessed on the amount used to pay the it), leaving only $73,333 left in the account to grow. Again, assuming an average annual return of 6%, the funds in the account will double approximately every 12 years, reaching about $146,667 by the time John is 62 and about $293,332 by the time he’s 74. In this scenario, John would have over $100,000 less in his tax-free Roth account after 24 years than if he had paid the tax using other assets.

No conversion of traditional IRA

If John doesn’t convert his traditional IRA, the account will continue to grow tax-deferred. Assuming the same annual growth rate of 6%, the funds in the IRA will double approximately every 12 years, reaching about $200,000 by the time John is 62 and about $400,000 by the time he’s 74. RMDs beginning at age 75 would be taxed as ordinary income, reducing the net benefit. Depending on how long John lives, though, sticking with a traditional IRA may be a better outcome for him than having converted and paid the taxes from IRA assets. This could also be an effective solution if John names a charity as his beneficiary.

The bottom line

Converting a traditional IRA to a Roth IRA is a complex decision that involves weighing immediate financial costs against long-term benefits. It requires careful consideration of tax implications, future income and tax-rate expectations, and possible benefits and drawbacks. By understanding all the factors that go into this decision, you can make informed choices that align with your financial goals and retirement plans.

A J.P. Morgan advisor can help you think through your choices, and you may want to work with tax and legal advisors to help you make the best decision for you and your family.