Roth conversion 2026: what you need to know before the end of the year

Roth individual retirement account conversions can potentially reduce taxes for life. But the strategy isn’t for everyone, and the choice is now more complex amid updates to President Donald Trump’s “big, beautiful bill” and other changes.

Roth conversions roll pre-tax or non-deductible IRA funds into a Roth IRA, jumpstarting tax-free growth. The trade-off is that they can generate more revenue in the year of conversion.

This move may be worth it if you have a large pre-tax retirement balance and expect higher tax rates when you withdraw the funds, experts say.

At the end of 2025, IRA-owning households in the United States held $15.9 trillion in assets in traditional IRAs, compared to $2.4 trillion in after-tax Roth IRAs, according to a 2026 report from the Investment Company Institute, a professional investment organization.

Weighing Roth conversions, or partial Roth conversions, is “a strategy that continues to be very popular year after year,” said Charissa Anderson, a certified financial planner and executive vice president of Ferguson Wellman Capital Management in Portland, Oregon. His firm ranked 52nd on CNBC’s 100 Financial Advisors list for 2026.

As of March 31, Roth conversions were up 41% this year compared to the same period in 2025, according to the latest data from Fidelity, based on an analysis of 19.6 million IRA accounts.

But experts say this strategy isn’t suitable for everyone.

“There are so many variables” when analyzing a possible Roth conversion, said Tommy Lucas, a CFP at Moisand Fitzgerald Tamayo in Orlando, Florida. His company is ranked No. 44 on CNBC’s Financial Advisor 100 list for 2026.

These could include when you file for Social Security, your life expectancy and your inheritance goals, among other factors, he said.

Depending on your tax bracket, “sometimes the juice isn’t really worth it,” Lucas said. “And we’re going to have to reduce every year” because multiple factors can change the analysis.

If you’re considering a Roth conversion before the end of the year, here are some key things to consider.

When deciding on a Roth conversion, projections should include current year taxes, as well as an analysis of future years, financial advisors say.

“The (tax) bracket you see is not always the rate you pay,” because higher income could phase out or reduce other tax benefits, according to CFP Tommy Blackburn, senior financial planner and partner at Mason and Associates in Newport News, Virginia. He is also a chartered accountant.

As an example, Blackburn cited a client in the 22% tax bracket with a child attending college. Income from a conversion could result in taxes higher than 30% because the client would lose an education tax credit, which is subtracted from their taxes owed, he said.

In comparison, a customer in the 10% tax bracket could convert a limited amount under their standard deduction without having to pay additional taxes for the current year, he said.

Increasing your AGI with Roth conversions can also reduce the premium tax credit, making Affordable Care Act Marketplace health insurance less expensive.

Earning even $1 more than a certain income limit can threaten credit eligibility — known as the “ACA cliff” — and enrollees could have to pay the full premiums for health coverage.

The cliff affects ACA enrollees when household income exceeds 400 percent of the federal poverty level, which varies by family size. For 2026, these limits are approximately $63,000 for a single person or $129,000 for a family of four.

That’s why policyholders in the health insurance market should “proceed with caution” before making a Roth conversion, said CFP Bill Shafransky, senior wealth advisor at Moneco Advisors in New Canaan, Connecticut.

“It’s one of those financial strategies where you really have to dot your i’s and cross your t’s before you act,” he said.

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