The Right Approach to Multiyear Roth Conversions

Jun 30, 2026

If all you know about Roth conversions is the headline version, you might be skeptical. Roth conversions sound a little too good to be true: Tax-free withdrawals on money you’ve accumulated in your traditional IRA or 401(k)? No required minimum distributions (RMDs) upon converting? There must be a catch … right?

Not exactly. Roth conversions are, in fact, a straightforward tool to consider in your retirement and estate planning. Hidden catches only appear when you don’t plan thoroughly.

With the right mindset, Roth conversions can be a savvy way to generate a substantial amount of wealth — primarily in the form of tax savings — for high-net-worth families. But it’s an outcome that requires proper timing and coordination with the rest of your financial strategy.

Let’s take a deeper look at the benefits of Roth conversions and how they might apply to your own financial picture.

What is a Roth Conversion?

Affluent investors often believe that Roth IRAs are not for them because of the income thresholds associated with contribution limits. In 2026, individuals earning more than $153,000 and couples earning more than $242,000 face restrictions on how much they can contribute to Roth IRAs. However, what often goes unmentioned is that direct contributions are not the only path to building Roth assets.

Enter Roth conversions. This is the process that involves moving funds from a pre-tax retirement account, such as a Traditional IRA, into a Roth IRA. The converted amount is generally treated as income — and subject to income taxes — in the year of the conversion, but investors can make qualified tax-free withdrawals later. When done properly, conversions allow investors to reap the benefits of tax-free compounding.

Roth conversions are a smart way to access the benefits of Roth IRAs if you are ineligible for maximum contributions based on a high income.

What About Multiyear Conversions?

Although it’s possible to convert the entirety of a Traditional IRA in a single year, it’s a move that rarely makes sense from a financial perspective. Converting too much money in a single year can push a person into a higher tax bracket. So, it’s essential for investors to develop a strategy that will maximize savings and adhere to the nuanced rules around conversions.

Most importantly, investors need to know about the two “5-year rules” that impact withdrawals and contributions related to a Roth conversion.

Understanding the 5-Year Rules

Understanding the multiple, sometimes overlapping “5-year rules” is essential to unlocking the full benefits of a Roth conversion.

The more familiar of the two is the 5-year Roth Contribution Rule, which impacts whether or not earnings in a Roth account can be withdrawn tax-free. This rule states that a Roth IRA must be in existence for at least five tax years prior to making a qualified distribution. (Qualified distributions must also occur after age 59½ or meet an exception, such as death or disability.)

It’s important to note that the clock starts on January 1 of the year of the first contribution or start of a conversion, rather than the exact date of that transaction. Another piece of good news: The clock does not restart with future contributions, rollovers, or conversions; once an individual satisfies this 5-year rule, it applies across all of the owner’s Roth IRAs.

The second 5-year rule applies specifically to assets recently converted into a Roth IRA. With the 5-Year Conversion Rule, unlike the previous one, each conversion has its own five-year holding period that must be met to avoid penalties on withdrawals. The clock for this rule similarly begins on January 1 of the year the conversion occurs. The purpose of this rule is to prevent individuals under the age of 59½ from avoiding a 10% early withdrawal penalty by converting pre-tax retirement assets and immediately withdrawing them. However, once the account owner reaches age 59½, the penalty associated with this rule no longer applies, even though the separate five-year contribution rule for tax-free earnings may still need to be satisfied.

It’s important to go over these rules, and more, with an advisor to ensure you don’t trigger unwanted penalties and taxes.

Common Mistakes

While it’s preferable to stay within your current tax bracket, investors often make the mistake of being too conservative with how much they convert to a Roth IRA. Leaving more money in your traditional retirement accounts can result in larger required minimum distributions (RMDs) later on in retirement, and potentially higher lifetime taxes.

However, funds moved into a Roth IRA are no longer subject to RMDs during the original owner’s lifetime. For individuals who do not need all of their retirement savings for current spending, Roth conversions can also help preserve assets for heirs, who may benefit from receiving tax-free Roth assets rather than fully taxable traditional IRA balances.

The key is planning ahead. The years between retirement and the start of RMDs often present a valuable opportunity to complete conversions while taxable income may be lower. Taking advantage of these years can help smooth out lifetime tax obligations and potentially reduce the impact of future RMDs.

Additionally, factors that often go overlooked with multiyear conversions include:

Future tax liability: Focusing solely on current tax brackets instead of projected lifetime tax liability can undercut potential savings. Don’t overlook the benefits of converting during low-income “gap years” between retirement and the start of Social Security or RMDs.
Other benefits: Investors often fail to account for the ripple effects of additional taxable income. Roth conversions can impact Medicare premiums, creating surcharges. (They can also increase the taxation of Social Security benefits.) And because conversions are irreversible, even a relatively small miscalculation can create unexpected costs.
Set-and-forget mentality: Investors should revisit the plan annually, if not more frequently, to make sure that income, tax laws, market conditions, and personal goals still align — or if changes are needed. .
Failure to Model: Assuming a one-size-fits-all approach rather than modeling multiple scenarios and conversion amounts.

Because every retiree’s tax situation is unique, the most effective multiyear conversion plans are reviewed regularly and adjusted as circumstances change.

How to Approach Modeling a Multiyear Roth Conversion Strategy

Roth conversions aren’t one-time tax maneuvers. They’re planning decisions that should be tied to ongoing, year-by-year modeling — which ideally gets done in conjunction with your wealth advisor.

How do you perform an analysis that clarifies what to do, when to do it, and how much to convert? A thoughtful conversion model is the way to go. Modeling should account for several key variables at once, including:

Current and projected taxable income: includes wages, pension income, consulting work, and other ongoing sources of cash flow.
Social Security timing and benefit levels: when benefits begin can significantly shift taxable income in later years.
Medicare premiums: today’s conversion decisions can affect healthcare costs several years down the line.
Charitable giving strategy: includes qualified charitable distributions (QCDs) or “bunching” approaches that may offset taxable income in specific years where conversions are larger.
Funding source for taxes: paying conversion taxes from taxable assets may have different long-term effects than withholding from retirement accounts.
Investment and market assumptions: expected returns and portfolio structure can influence whether shifting assets into a Roth meaningfully improves long-term outcomes.

When these factors are layered together, the analysis becomes less about optimizing a single year’s tax bill and more about shaping an entire retirement tax curve.

How IMA Private Wealth Helps

IMA Private Wealth helps clients build unique plans for retirement, including strategies for Roth conversions that are based on year-by-year modeling, not guesswork.

Schedule a time to have a conversation with an advisor about what to do, when to do it, and how much to convert.

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