If you’ve been considering a Roth conversion, the next year may offer a key opportunity. With the Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, many Americans—especially those approaching retirement—could see their federal income tax rates revert to pre‑2018 levels beginning in 2026 (York, 2024). For some, that makes 2024 and 2025 a potentially strategic window to convert pre-tax retirement savings into a Roth IRA.

But like any financial decision, timing and personal goals matter. Let’s explore what a Roth conversion is, what the upcoming tax law changes mean, and how this decision might fit into your broader retirement plan using our FOCUS framework.

What Is a Roth Conversion?

A Roth conversion involves transferring funds from a traditional IRA or 401(k)—which are taxed when you withdraw them—into a Roth IRA, where future qualified withdrawals are tax-free. You’ll pay ordinary income tax on the amount converted in the year of the conversion, but once the funds are in the Roth, they grow tax-free and can be withdrawn tax-free in retirement (IRS, 2023).

Why 2024–2025 Could Be a Smart Time to Convert

Under the TCJA, tax brackets were temporarily lowered. Unless Congress takes action, these rates are scheduled to increase in 2026, meaning conversions made now may be taxed at lower rates than they would be after the sunset of the law.

Here’s a simplified example:

• In 2025, a married couple filing jointly with $100,000 in taxable income pays 12%–22% marginal tax.
• In 2026, under pre-TCJA brackets, that same income could fall into the 15%–25% range.

Converting now could “lock in” today’s lower rates—potentially saving thousands in taxes over time.

Considerations Before You Convert

Before jumping in, here are a few things to consider:

• Will the conversion push you into a higher tax bracket?
  Spreading conversions over multiple years may reduce your total tax burden.
• Do you have cash to pay the taxes?
  Paying taxes out of pocket (rather than from the IRA) preserves more of your retirement funds.
• What is your retirement timeline?
  Roth IRAs offer long-term benefits, so the younger you are at conversion, the more you stand to gain.
• Will you need the funds soon?
  Roth conversions have a five-year rule before you can withdraw converted funds without penalty.

A Word of Caution

A Roth conversion isn’t a fit for everyone. According to Fidelity (2023), some investors may benefit more than others based on income level, timeline, and future tax expectations. For some, the upfront tax hit may outweigh the long-term benefit, especially if you anticipate being in a lower tax bracket in retirement. That’s why it’s essential to work with a financial advisor or tax professional to evaluate your individual situation.

Let’s See If a Roth Conversion Is Right for You

The 2026 tax changes are on the horizon—but with thoughtful planning, you can potentially make them work in your favor. At McIntosh & Associates, we help clients throughout Michigan make confident decisions about their future.

Call (989) 692-2200 to schedule a visit
Or request a free consultation to explore your Roth strategy before year-end

References

IRS. (2023). Topic No. 451 — Individual Retirement Arrangements (IRAs). Retrieved from https://www.irs.gov/taxtopics/tc451

York, E. (2024, January 16). What happens when the Tax Cuts and Jobs Act expires? Tax Foundation. https://taxfoundation.org/blog/2026-tax-brackets-tax-cuts-and-jobs-act-expires

Fidelity Investments. (2023). Should I convert to a Roth IRA? Retrieved from https://www.fidelity.com/viewpoints/retirement/roth-ira-conversion

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