Year-End Financial To-Do: Evaluate Roth IRA Conversion

Dec 21, 2021

By Theresa Cagle Fry, Senior Vice President, Manager of IRAs, Retirement & Education Planning

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If you have been considering a Roth conversion, there are only a few weeks left in the year for the conversion to count as a taxable transaction for 2021. Unlike eligibility rules for Roth IRA contributions, anyone can choose to convert existing traditional IRA assets to a Roth IRA, but conversion comes with a cost – you pay income taxes on the amount you convert in the year you convert.

Why would you consider a Roth conversion? It can be advantageous if you:

  • Desire tax-free retirement income (after 5 years and age 59½)
  • Don’t want to take required minimum distributions during your lifetime
  • Desire tax-free income for your heirs after your death

One particular conversion strategy that could warrant a review before the end of 2021 is the back-door Roth conversion strategy. This involves making non-deductible (after-tax) contributions to a traditional IRA and then immediately converting to a Roth IRA. If you have been using the back-door Roth conversion strategy to fund your Roth IRA, this year-end may be the last year you can do it. Recent proposals in Congress would eliminate the back-door Roth strategy and the conversion of any after-tax contributions all together as of January 1, 2022.

Conversion is not right for everyone and you should review your individual circumstances with a tax professional prior to making a decision to convert because once you convert, you cannot undo it.


Benjamin F. Edwards & Co. does not provide legal or tax advice, therefore it is also important to consult with your legal and tax professionals for additional guidance tailored to your specific situation.