“It was the best of times, it was the worst of times…”

-Charles Dickens, CFP?

That line could have been written about Roth IRA contributions, Roth IRA conversions, and tax brackets. I’m sure that’s what Dickens was thinking.

Roth contributions and Roth conversions are at their best when you can pay tax at a relatively low rate today and avoid paying a higher rate later. They’re at their worst when you convert during a high-income year and accidentally light up half the tax code.

At NTX Wealth Partners, we spend a lot of time identifying and discussing what I call the Income Valley of Opportunity. That’s usually where Roth conversions shine.

First: The Easy Example of the Right Time to Contribute

Two of our three daughters are now college graduates and working full-time. They’re in the 12% federal tax bracket right now. That’s prime Roth territory. If you can pay 12% or lower tax today on dollars that may grow for 40+ years, that’s a strong trade. Compared to paying 22%, 24%, or higher later, it’s almost unfair.

Young earners in lower brackets should consider:

• Roth 401(k) contributions
• Roth IRA contributions (if eligible)
• Converting any small pre-tax IRA balances

Pay tax when it’s cheap. Let compounding do the rest. Also, every time a kid graduates from college, your cash flow improves and your Roth strategy improves. Coincidence? I think not. I’m also happy to announce that daughter #3, Alexa, is scheduled to graduate college later this year, which means somewhere a Roth IRA or 401(k) will be funded and an angel will get its wings 😊.

Now Let’s Talk About Retirees

Most of our clients aren’t 22. Add 40 years, give or take 10, and they’re nearing retirement or recently retired. That’s where the real planning happens.

When someone retires, their income often drops. The paycheck stops. But Social Security hasn’t started yet. Required Minimum Distributions (RMDs) haven’t kicked in yet either. That window, between retirement and Social Security or RMD age, is what I call the Income Valley of Opportunity.

During that valley:

• Taxable income is often temporarily lower
• You may be living off cash or brokerage assets with relatively low tax liability
• Your IRA hasn’t started forcing distributions yet

This is often the ideal time to consider strategic Roth conversions.

Filling the Bracket Intentionally

We often run projections to see how much room a client has in their current tax bracket. For many households:

• Filling up the 12% bracket is almost a no-brainer
• The 22% and 24% brackets can make sense depending on long-term projections

The goal isn’t to convert everything. The goal is to convert the right amount, in the right years, at the right rate.

Three Reasons to Convert:

1. Reduce Future RMDs

If you shrink the Traditional IRA today, future required distributions will be smaller. That can reduce taxable income later in life.

2. Improve Tax Flexibility

Having both pre-tax and Roth assets gives you control. In higher-income years, you can pull from Roth and avoid jumping brackets.

3. Potential Estate Benefits

Generally, it’s more ideal for heirs to inherit Roth dollars rather than large taxable IRAs, especially given the distribution timing rules for inherited accounts. Most non-spouse beneficiaries are required to distribute the entire IRA within 10 years as taxable income.

When It’s the Worst of Times

Conversions are usually not ideal when:

• You’re still earning peak career income
• A large bonus or business sale has already pushed you into a high bracket
• The conversion triggers expensive side effects, which I’ll cover more in Part 2

Timing matters. Roth conversions are less about tax ideology and more about tax math.

The Bottom Line

Roth conversions are powerful tools. But they are timing tools. The best years to convert are often:

• Early career, low-income years
• Early retirement, before Social Security
• Down market years when account values are temporarily depressed

The worst years are often:

• Peak earning years
• Years with large capital gains or liquidity events
• Years where the tax impact spills into unintended consequences

In Part 2, we’ll walk through the Roth Conversion Stress Test: 10 Things to Watch Before You Pull the Trigger—because while conversions can be smart, they are not automatic.

If you’re approaching retirement and want to explore whether you’re in your own Income Valley of Opportunity, let’s talk. We’ll run the projections and make the decision based on math, not headlines.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.