How to Convert a Traditional IRA to a Roth IRA

A Roth conversion moves money from a traditional IRA to a Roth IRA in a single taxable event

A Roth conversion is a direct transfer of funds from your traditional IRA to a Roth IRA. You report the conversion on your tax return for that year, pay income tax on the amount converted, and from then on that money grows tax-free in the Roth. There is no annual limit on how much you can convert — you can move your entire traditional IRA balance if you choose. The trade-off is a tax bill in the year you convert, but future withdrawals and growth avoid taxation entirely.

The conversion itself is straightforward: you contact your IRA custodian (the bank, brokerage, or investment firm holding your account) and request a conversion. Some custodians call it a "Roth conversion," others a "rollover to Roth." The custodian handles the paperwork and the transfer. You do not need IRS permission beforehand. What matters is reporting it correctly on your tax return and understanding the tax consequences before you move the money.

Key Takeaways

• You can convert any amount from a traditional IRA to a Roth IRA at any time, with no annual limit, but you must pay income tax on the pre-tax dollars you convert.
• The conversion is taxable in the year you make it, so a large conversion can push you into a higher tax bracket and trigger the net investment income tax if your income exceeds certain thresholds.
• If you have multiple traditional IRAs, SEP IRAs, or SIMPLE IRAs, the IRS treats them as one account for tax purposes when calculating the tax on a conversion — you cannot convert only the after-tax portion and leave the pre-tax portion behind.
• You must report the conversion on Form 8606 when you file your tax return; the custodian will send you a Form 1099-R showing the amount converted.
• Once money is in the Roth, you can withdraw contributions immediately tax-free, but earnings cannot be withdrawn tax-free until you are 59½ and the account has been open for at least five years.

When a conversion makes financial sense

A conversion is most attractive when your current tax bracket is lower than you expect it to be in retirement. If you are between jobs, took a sabbatical, or had a year of unusually low income, converting in that year means paying tax at a lower rate than you might later. Similarly, if you expect tax rates to rise in the future — either because your income will increase or because you believe federal tax rates will increase — locking in today's rate can save money over decades.

A conversion also makes sense if you have a large traditional IRA balance and do not need the money to live on. The longer the money sits in a Roth, the more tax-free growth it compounds. Someone who converts at 50 and does not touch the account until 70 gets 20 years of tax-free compounding. By contrast, a traditional IRA forces you to take required minimum distributions (RMDs) starting at age 73, which can push you into a higher tax bracket and trigger taxation of Social Security benefits. A Roth has no RMDs during your lifetime, so you control when and whether to withdraw.

Conversions are also useful for people with high income who cannot contribute directly to a Roth because of income limits. If your income exceeds the Roth contribution limit threshold, you can contribute to a traditional IRA and immediately convert it to a Roth — a strategy sometimes called a "backdoor Roth." This only works if you have no other pre-tax IRA balances; if you do, the pro-rata rule (explained below) will create a tax bill.

The pro-rata rule and why it matters if you have multiple IRAs

The pro-rata rule is the most common trap in Roth conversions. It says: if you own any traditional, SEP, or SIMPLE IRAs on December 31 of the year you convert, the IRS treats all of them as a single pool for tax purposes. When you convert, you cannot pick and choose which dollars to convert — the IRS calculates what percentage of your total IRA balance is pre-tax and what percentage is after-tax, then applies that percentage to the amount you convert.

Example: You have a traditional IRA with $90,000 in pre-tax contributions and a separate traditional IRA with $10,000 in after-tax contributions (money you contributed but did not deduct). Your total is $100,000, of which 90% is pre-tax. If you convert $10,000, the IRS says 90% of that conversion ($9,000) is taxable and 10% ($1,000) is not. You owe tax on $9,000 even though you only converted the after-tax IRA.

To avoid the pro-rata rule, you must have zero balance in all traditional, SEP, and SIMPLE IRAs on December 31 of the conversion year. One way to do this is to roll those pre-tax balances into your employer's 401(k) plan (if the plan accepts rollovers) before you convert. Another is to convert everything at once. If you have after-tax money in a traditional IRA and want to convert only that, rolling the pre-tax portion to a 401(k) first is the cleanest path.

The tax bill and how to estimate it

The amount you convert is added to your ordinary income for that year. If you convert $50,000, your taxable income increases by $50,000. That increase can push you into a higher tax bracket, meaning you pay not just the marginal rate on the conversion but potentially a higher rate on some of your other income too.

To estimate your tax bill, add the conversion amount to your expected income for the year, then calculate your tax using that total. You can use the IRS tax tables or a tax calculator. The effective rate on the conversion is usually somewhere between your current marginal rate and the next bracket up, depending on how much room you have before hitting the next bracket.

A large conversion can also trigger the net investment income tax (3.8% additional tax on investment income) if your modified adjusted gross income (MAGI) exceeds $200,000 (single) or $250,000 (married filing jointly). It can also cause your Medicare premiums to increase, because Medicare uses your income from two years prior to set premiums. A conversion in 2024 affects your 2026 Medicare premiums.

Some people spread conversions over multiple years to stay in a lower bracket each year. Others do one large conversion in a year when their income is unusually low. There is no single right answer — it depends on your income pattern, your tax bracket, and your life expectancy.

The five-year rule for withdrawing earnings

Once you convert money to a Roth, you can withdraw your contributions (the amount you actually moved) at any time, tax-free and penalty-free. But the earnings on that money — the investment gains — are subject to a five-year holding period. You cannot withdraw earnings tax-free until you are 59½ and the Roth IRA has been open for at least five years.

The five-year rule applies separately to each conversion. If you convert $10,000 in 2024 and another $10,000 in 2025, each conversion has its own five-year clock. The 2024 conversion can have its earnings withdrawn tax-free starting in 2029 (if you are 59½), while the 2025 conversion's earnings cannot be touched until 2030.

If you withdraw earnings before age 59½ and before the five-year period ends, you owe income tax on the earnings plus a 10% penalty. The exception: if you have a may have access to hardship (disability, medical expenses, first-time home purchase up to $35,000 lifetime), you may avoid the penalty but still owe tax on the earnings.

How to execute a conversion step by step

Contact your IRA custodian — the institution where your traditional IRA is held — and ask to convert funds to a Roth IRA. If you do not yet have a Roth IRA, you will need to open one first, either at the same custodian or elsewhere. Some custodians allow you to open and convert in one call; others require you to open the Roth first.

Tell the custodian the amount you want to convert. They will ask whether you want to convert to a Roth at the same institution or transfer to a Roth elsewhere. If you are converting to a Roth at a different custodian, the process is a trustee-to-trustee transfer, which avoids the 60-day rollover rule and is the cleanest method.

The custodian will send you a Form 1099-R for the year of the conversion, showing the amount converted in box 1 and the taxable amount in box 2a. You will also receive a Form 5498-R showing the contribution to your Roth. When you file your tax return, you report the conversion on Form 8606 (Nonqualified Distributions From Education Savings Accounts). Form 8606 is where you calculate how much of the conversion is taxable using the pro-rata rule.

If you are doing a backdoor Roth (converting a non-deductible contribution you just made), file Form 8606 for both the year you make the contribution and the year you convert. This documents that the money was after-tax and should not be taxed again on conversion.

Conversions and required minimum distributions

If you are over 73 and subject to required minimum distributions (RMDs) from your traditional IRA, you can still convert. However, the IRS requires you to take your RMD first in that year — you cannot convert the RMD amount. You must withdraw the RMD, then convert any remaining balance if you choose.

This rule exists to prevent people from avoiding RMDs by converting their entire balance. If you are 73 or older and want to convert, calculate your RMD first, withdraw it, and then convert the rest. The RMD is taxable regardless; the conversion is taxable on top of that.

Frequently Asked Questions

Can I undo a Roth conversion if the market drops after I convert?

No. The IRS eliminated the ability to recharacterize conversions (undo them) starting in 2018. Once you convert, the conversion is permanent. If the market drops and your converted balance shrinks, you still owe tax on the original amount you converted, not the lower value. This is why some people wait to convert until after a market downturn, when balances are lower.

Do I have to convert my entire traditional IRA, or can I convert just part of it?

You can convert any amount, from a small portion to the entire balance. However, if you have multiple traditional IRAs, the pro-rata rule treats them as one account. You cannot convert only the after-tax portion of one IRA and leave the pre-tax portion behind — the tax is calculated on the combined balance of all your traditional IRAs.

What happens if I convert and then need the money back?

Once converted, the money is in your Roth and you can withdraw your contributions anytime tax-free. But you still owe the tax on the conversion in the year you converted, even if you withdraw the money later. The tax bill does not go away. If you think you might need the money, consider whether the conversion makes sense before you do it.

Does a Roth conversion count as income for Social Security taxation?

A Roth conversion increases your modified adjusted gross income (MAGI), which can trigger taxation of your Social Security benefits if your combined income (adjusted gross income plus half your Social Security benefits) exceeds $25,000 (single) or $32,000 (married filing jointly). If you are close to these thresholds, a large conversion could push you over and cause up to 85% of your benefits to become taxable.

Can I convert my employer 401(k) directly to a Roth?

No. You can only convert a traditional IRA to a Roth IRA. If you have a 401(k), you must first roll it to a traditional IRA, then convert the IRA to a Roth. Some employers allow in-service distributions to a Roth 401(k), which is a different process — ask your plan administrator whether your plan offers this option.