Everyone's talking about Roth conversions, but here's how few people really do them - and why you shouldn't have FOMO about it

By Beth Pinsker

You have to do the math to figure out your best tax strategy in retirement, and converting might not be for you

Do you want to pay tax on your retirement money now or later?

There's no hotter topic in retirement than Roth conversions. But for all the ballyhoo, the number of people who actually follow through with a Roth conversion is small compared with the number who hold money in tax-deferred accounts.

The Investment Company Institute, which tracks industry data, reported that 1.6 million Roth conversions happened in 2023, based on the most recent available IRS data. The total amount converted was $36.7 billion, out of about $17 trillion held in traditional IRAs in the U.S. The average amount converted was just under $23,000.

There's nothing to suggest these numbers are changing dramatically. The number of conversions was 1.5 million in 2021 and 2022, according to ICI. Fidelity said just 2% of its 20 million or so IRA customers made a Roth conversion transaction in 2025 an that the number had not changed much so far in 2026.

"People are hungry for it, but the dollars, from what we see, are still pretty small. There's basically a lot of engagement without a lot of transactions," said Rita Assaf, Fidelity's vice president of retirement and college products.

It turns out that while the interest is genuine, there are still serious barriers for most people. Namely, there are a few criteria for the conversion to be worthwhile: You need the money on hand to pay the tax, the knowledge that you'll actually benefit from paying that tax now versus later, and the know-how to complete the complicated transaction.

Doing the math

Running the numbers to determine whether a Roth conversion will be beneficial is not an easy task. If you're on your own with the decision, you have to turn to online calculators and self-directed software programs like Boldin and MaxiFi, which are available for a fee. Online forums and advice columns can provide feedback, but that would just be based on a cursory overview of your situation. You can easily run into walls, which may explain some of the discrepancy between the number of people who have an interest in Roth conversions and the number who actually do them.

Assaf said Fidelity cannot tell from the anonymized data if those completing conversions had help from advisers but that she would presume they did. "I can say that Roth comes up as a planning topic for retirement, and clients expect that their adviser would bring it up - or the clients bring it up," Assaf said. "I have a feeling most of [the conversion activity] is coming from advisers doing planning, more so than it is self-directed, but that's just me taking a guess."

Professional financial advisers use software to run projections, but even that is not perfect. Run your scenario through three different programs, and you will get three different answers. Elizabeth Buffardi, a fee-only financial planner based in the Chicago area, developed her own spreadsheet to run analyses for clients, because none of the software appealed to her. One key aspect she found lacking in off-the-shelf solutions was that they measured for a few decades but not for an entire lifespan. She likes to stretch out her scenarios until the IRA owner in question turns 101.

When Buffardi is doing the math, she wants to see if the client will end up paying more or less in lifetime taxes as the result of a conversion. That's an equation that incorporates educated guesses, considering that future tax rates are unknown, but the best she can do is project the current system through future years.

For some clients, the resulting savings are small, a function of the size of their IRAs and the difference between their current tax rate and their future tax rate. She has seen the difference be as little as $15,000 or $25,000 in lifetime taxes.

"You don't need to pinpoint it the way I do, but I like to give people a number," Buffardi said. When the amount they are saving is low, people tend to balk at the Roth conversion. They don't see why they should shell out tax money now for a small amount of savings down the road.

More often, when considering account balances of more than $1 million, the lifetime tax savings is closer to $100,000 or $200,000. That's when clients begin to take action, especially if they are facing high required minimum distributions later in life. Required minimum distributions can add layers of complication to a retirement plan, such as triggering the Medicare surcharge known as IRMAA and higher taxation of their Social Security benefits. Buffardi has seen the lifetime savings go as high as $1 million.

Tax aversion

The first step of a Roth conversion is to take money out of a tax-deferred account and pay the tax due, and then move it to the Roth account. The best scenario is to pay that tax with cash on hand, because then the full amount of the conversion can go into the Roth account to grow tax-free.

This stops a lot of people in their tracks. Either they don't have enough money or they don't want to shell out that much to pay the tax.

Another consideration is the endgame for the money. If someone plans going to spend down whatever is in their IRA by the time they die, then there's no need to convert. If any money left in the account will be earmarked for a charity, the more tax-efficient strategy is to leave it where it is.

Roth conversions make the most sense for married couples with large IRA balances, because after one spouse dies, the other will have to pay taxes as a single person on the same amount of money. They also come into play for people who going to leave the money in those accounts to heirs. "A lot of the clients I have are very concerned about leaving good assets to kids," Buffardi said. An inherited IRA has to be emptied in 10 years, into a regular brokerage account in most cases, and this generally happens when the account owner's adult children are in their peak earning years, with their own kids in college. "They end up saying, this money would be really helpful if I weren't giving half to the government and half to college," Buffardi said.

There's a lot of hype around Roth conversions, which is why some younger people are inclined to make them, Assaf said. But there's a better avenue for those investors, she said. "Do you know you could be eligible for Roth contributions? They're looking at the back door when they could go through the front door," she said. "Do the math. Don't just believe the hype."

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10-23-26 1100ET