Pros and Cons of Partial Roth Conversions Over Several Years

How partial Roth conversions actually work

A partial Roth conversion means you convert only some of your pre-tax retirement balance (for example $10k–$50k a year) instead of the whole account in one year. Each year you convert, the taxable portion of the conversion is reported as ordinary income on that year’s tax return. The converted funds grow inside the Roth and — assuming you meet the IRS rules for qualified distributions — future withdrawals of earnings and principal are tax-free (IRS Publication 590-A/B).

Because conversions are taxable events, many people spread them over several years to:

• Stay inside a lower federal tax bracket.
• Avoid surges in taxable income that could increase Medicare Part B/D premiums (IRMAA), raise Social Security taxation, or push capital gains into higher brackets.
• Take advantage of low-income years, such as early retirement years before required minimum distributions (RMDs) start.

Note two important rules:

1. Roth conversions are irreversible (recharacterizations of conversions were eliminated by the Tax Cuts and Jobs Act of 2017 for conversions after 2017). You cannot undo a conversion once filed (IRS guidance).
2. Conversions may be subject to a 5-year rule for each conversion when it comes to avoiding the 10% early withdrawal penalty on converted amounts withdrawn before age 59½ (see IRS Publication 590-A).

Pros: Why people use partial conversions

1. Tax diversification and certainty

• Converting a measured amount each year creates a mix of tax-free (Roth) and tax-deferred (traditional) assets. That diversification reduces sensitivity to future tax-rate uncertainty and gives you flexibility about which account to draw from in retirement.

1. Potentially lower lifetime taxes

• If you expect tax rates to be higher later (or your taxable income to rise in retirement), paying tax now on some funds at today’s rates can lower total lifetime taxes.

1. Smooths tax impact and avoids bracket creep

• Partial conversions let you keep taxable income in desired brackets instead of incurring a large one-year tax bill. That can prevent higher Medicare IRMAA surcharges and more of your Social Security from becoming taxable (see IRS and SSA guidance on IRMAA and Social Security taxation).

1. Better control of RMD timing and amounts

• Roth IRAs do not require RMDs for the original owner (unlike traditional IRAs), so moving money to a Roth can reduce future RMD pressure and preserve tax-free growth.

1. Estate-planning advantages

• Heirs receive Roth assets that generally grow tax-free for them (subject to inherited-IRA rules under the SECURE Act). This can make estate distributions simpler and more tax-efficient.

1. Tactical market-timing advantage

• Converting during a market downturn can be advantageous because you pay tax on a smaller account balance and then the Roth has more opportunity for tax-free recovery.

Cons and risks: What can go wrong

1. Immediate tax bill

• Conversions are taxable as ordinary income in the year of conversion. If you don’t plan to pay those taxes from outside retirement funds, you can erode the conversion’s benefit.

1. Risk of moving into a higher bracket or triggering surtaxes

• If you convert too much in a year, you may push yourself into a higher federal bracket, increase Medicare IRMAA, or make more Social Security benefits taxable.

1. Loss of recharacterization option

• Because conversions can’t be undone, you can’t reverse a conversion if taxes rise or your situation changes. That makes planning and projection more important.

1. State tax variability

• Some states tax Roth conversions differently (or not at all). State rules vary and can affect whether a conversion makes sense.

1. Complexity and planning costs

• Partial conversions require annual modeling and coordination with your tax situation, Social Security timing, and other income. Many clients need professional help, which adds fees.

1. Potential penalties for early withdrawals of converted amounts

• A separate 5-year rule applies to conversions for penalty avoidance. If you withdraw converted funds within five years and are under age 59½, you may face the 10% early withdrawal penalty on the taxable portion of the conversion (IRS Publication 590-A).

Practical implementation: a step-by-step approach

1. Project future taxable income and tax brackets

• Model your expected taxable income for the next 5–10 years, including pensions, Social Security, capital gains, and RMDs.

1. Identify low-income windows

• Consider converting during years with unusually low income (a job gap, early retirement before RMDs, capital loss carryforwards, or after a big charitable deduction).

1. Decide annual conversion targets

• Choose conversion amounts that keep you inside targeted tax brackets and avoid IRMAA or other cliffs.

1. Pay conversion taxes from outside the retirement account

• If possible, pay conversion taxes from non-retirement funds so the full converted amount stays in the Roth to compound tax-free.

1. Revisit annually

• Laws and personal situations change — review your plan yearly. Use scenario modeling to react to income shocks, tax-law shifts, or changes in health coverage.

1. Coordinate with other planning (charitable giving, capital gains harvesting)

• Bundling charitable gifts (bunching) or harvesting capital losses/gains can optimize the net tax impact of conversions.

Sample scenario (illustrative)

Assume you expect $40k of ordinary income in early retirement. Converting $15k per year for three years might keep you inside the 12% bracket while locking that converted amount into Roth growth. If you instead converted $100k in one year, you could move into a 24% bracket and incur a larger Medicare surcharge. This example underscores why partial conversions can be preferable for incremental tax control. (Numbers are illustrative; run exact projections for your situation or consult a tax pro.)

When partial conversions make the most sense

• You have years with unusually low taxable income.
• You anticipate higher tax rates in the future (personally or legislatively).
• You want to reduce future RMD complexity or leave tax-free assets to heirs.
• You can pay the conversion tax from non-retirement funds.

For deeper tactical frameworks, see our guides: Roth Conversion Roadmap: When and How to Convert for Retirement, Roth Conversion Windows: When Partial Conversions Make Sense, and How Roth Conversions Affect Your Tax Bracket.

Common mistakes to avoid

• Converting without paying the tax from outside sources.
• Failing to model IRMAA, Social Security taxation, or state taxes.
• Ignoring the 5-year penalty rule on conversions if you may need the money early.
• Over-converting in a single year because of short-term market moves without considering long-term tax consequences.

Quick checklist before you convert

• Run multi-year tax projections (include federal and state tax).
• Confirm you can pay taxes from non-retirement cash.
• Check IRMAA and Social Security implications.
• Confirm the conversion cannot be recharacterized later.
• Talk to a CPA or fee-only financial planner if your situation involves estates, business sales, or large unexpected income.

Authoritative resources

• IRS Publication 590-A and 590-B (Roth IRAs and distributions) — irs.gov
• IRS page on Roth IRAs and rules (irs.gov)
• Social Security and Medicare IRMAA guidance — ssa.gov and cms.gov
• Consumer Financial Protection Bureau: retirement planning guides — consumerfinance.gov

Final thoughts (professional insight)

In my practice, partial Roth conversions are a high-utility tool when timed against clear low-income years and coordinated with a broader retirement cash-flow plan. They’re not a one-size-fits-all solution: the tax hit in the conversion year and the irreversible nature of the move mean you should model multiple scenarios before acting. For many clients, converting a targeted amount each year reduces long-term uncertainty and improves retirement flexibility; for others with limited outside funds to pay conversion taxes, it can be counterproductive.

Professional disclaimer: This article is educational and does not replace personalized tax or financial advice. Rules and tax-treatment can change; check current IRS guidance and consult a qualified CPA or financial planner before executing conversions.