Partial Roth Conversions: A Smart Move for High-Balance IRAs  

For many savers, a growing IRA feels like a reward for years of hard work and disciplined investing. Yet as balances climb into the high six or seven figures, those same accounts can quietly become one of the largest future tax bills you’ll ever face.  

Most people don’t realize that the IRS is a silent partner in their retirement. Every dollar in a traditional IRA is still untaxed income, and once required minimum distributions (RMDs) begin, those withdrawals are taxed on the government’s schedule, not yours.  

Consider Linda, who built a $1.5 million IRA through decades of saving. She expected a comfortable retirement, but her required withdrawals pushed her into a higher tax bracket, raised her Medicare premiums, and created an unexpected annual tax bill. Her savings were still growing, but so was her tax problem.  

That’s where partial Roth conversions come in. Converting portions of a traditional IRA to a Roth allows you to pay taxes strategically, often during lower-income years or before tax rates rise. The goal is to transform part of your tax-deferred balance into tax-free income, giving you more flexibility in how and when you draw from your savings.  

What Is a Partial Roth Conversion?  

Think of your IRA like a pie. Each slice represents a portion of your savings that the IRS expects a share of at some point. A partial Roth conversion is a way to decide when and how much of that pie you want to make tax-free for the future.   

In simple terms, a partial Roth conversion means moving a portion of funds from a traditional IRA into a Roth IRA. When you do this, you pay income tax on the amount converted in the year of the transfer. Once inside the Roth, the money can grow tax-free, and qualified withdrawals are not subject to income tax.  

What makes this approach so powerful is its flexibility. You do not have to convert your entire IRA at once. Instead, you can convert smaller amounts over several years, staying within your preferred tax bracket and spreading out the tax impact. This is what makes a partial conversion so strategic for high-balance IRA owners. It offers control over timing and taxation while allowing you to gradually build a source of tax-free income for retirement or for your heirs.  

Imagine it as a series of small, intentional moves rather than one large, overwhelming decision. This gradual process allows you to respond to changes in your income, tax rates, and financial goals as they evolve.  

For many, the decision to explore a partial Roth conversion begins with one simple question: Would you rather plan your taxes now, or let the IRS decide later?  

Why Partial Conversions Can Be a Smart Strategy for High-Balance IRAs  

For many retirees, the real challenge isn’t growing their IRA but rather managing how and when that money is taxed. A partial Roth conversion turns what could be an unavoidable future tax burden into a planned opportunity.  

Imagine a couple retiring at 62. Their income will drop for several years until Social Security and required minimum distributions begin. During this lower-income period, they decide to convert $100,000 of their IRA each year instead of waiting and converting a large amount all at once. By spreading conversions over time, they stay within their preferred tax bracket, reduce future RMDs, and create a growing pool of tax-free income.  

This kind of proactive planning can:  

• Lock in today’s lower tax rates before scheduled changes take effect after 2025.  

• Reduce future taxable income, which may help limit the ripple effect on Medicare premiums and Social Security taxation.  

• Provide flexibility in retirement, giving you both taxable and tax-free income sources to choose from.  

Partial conversions are ultimately about choice, deciding when to pay taxes rather than letting future policy changes decide for you.  

Timing and Tax Considerations  

With Roth conversions, timing is everything. A well-planned conversion can turn a tax burden into a long-term advantage, while poor timing can do the opposite.  

The best opportunities often appear during “gap years”—the period after retirement but before RMDs or Social Security begin. With lower income during these years, many retirees find room to convert portions of their IRA at more favorable tax rates. For example, a couple retiring at 62 may choose to convert $100,000 per year for a decade rather than one large lump sum. This approach helps manage their tax bracket and gradually reduces the size of future RMDs.  

Timing also matters in light of policy changes. Current tax brackets are historically low but are scheduled to expire after 2025. Converting earlier could make sense for those who expect higher rates ahead.  

Because a Roth conversion counts as taxable income, it should be carefully coordinated with your broader financial plan. A qualified tax professional can model different scenarios to help you weigh costs today against future flexibility.  

Common Mistakes to Avoid  

Even a solid strategy can lose its impact without careful execution. Avoiding a few common missteps can help make a Roth conversion more effective.  

1. Converting too much too fast  

Converting large amounts in one year can push you into higher tax brackets and raise Medicare premiums. Smaller, gradual conversions often work better for maintaining control over your taxable income.  

2. Paying taxes from your IRA  

It may seem easier to use IRA funds to cover conversion taxes, but that decision reduces the amount left to grow tax-free. Whenever possible, use funds from a non-retirement account to cover the tax bill.  

3. Treating a conversion as a one-off decision  

A Roth conversion should fit within your overall financial, tax, and estate plan. Uncoordinated decisions can create unintended tax overlaps or missed opportunities elsewhere.  

Thoughtful coordination with your advisor can help you make each step purposeful and aligned with your broader goals.  

Integrating Roth Conversions into a Broader Tax Strategy  

A partial Roth conversion is most powerful when it works alongside other planning strategies. Coordinating with charitable giving, life insurance, or estate planning can amplify its impact.  

Some families offset conversion taxes through charitable giving, using donor-advised funds or qualified charitable distributions (QCDs). Others use life insurance to replace the funds used for conversion taxes or create an additional legacy asset for heirs.  

When integrated with trust and estate planning, conversions can also simplify wealth transfer. Under current law, inherited Roth IRAs must be distributed within 10 years, but those withdrawals are tax-free, which is an advantage for families looking to preserve assets across generations.  

The key is to view Roth conversions as part of a multi-year tax and estate strategy, not a one-time transaction. Working closely with your financial and tax advisors can help align each move with your long-term vision.  

Is a Partial Roth Conversion Right for You?  

A partial Roth conversion can be an effective planning tool, but like any strategy, it depends on your individual circumstances. The right move aligns with your income, tax outlook, and legacy goals.  

Ask yourself a few key questions before taking action:  

• Do you expect to be in a higher tax bracket later?  

If your income or tax rates are likely to rise, converting now could mean paying taxes at today’s lower rates instead of tomorrow’s higher ones.  

• Do you have funds outside your IRA to pay conversion taxes?  

Covering the tax bill with non-retirement assets allows the converted funds to grow undisturbed, maximizing the long-term benefit of the Roth.  

• Are you planning to leave your IRA to heirs?  

Inherited Roth IRAs must be distributed within 10 years, but those withdrawals are tax-free, offering flexibility and potential savings for the next generation.  

Conclusion  

The most valuable step you can take right now is to explore what this means for you. Understanding how different strategies interact with your income, estate plan, and family goals can reveal options you may not have considered.  

Contact our team to discuss how a Roth conversion could fit within your broader financial plan and long-term legacy goals.  

Download our free guide, 3 Key Planning Opportunities for Large IRAs, to explore additional ways to reduce taxes and strengthen your legacy.  

Standard Disclosure  

This blog expresses the author’s views as of the date indicated, are subject to change without notice, and may not be updated.  The information contained within is believed to be from reliable sources.  However, its accurateness, completeness, and the opinions based thereon by the author are not guaranteed – no responsibility is assumed for omissions or errors.  This blog aims to expose you to ideas and financial vehicles that may help you work towards your financial goals. No promises or guarantees are made that you will accomplish such goals.   

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