Nathan Hawrot | Dec 26 2025 14:00
Roth IRA Conversion: Your Questions Answered
Roth IRA Conversions: What You Need to Know
In the ever-changing financial landscape, taking control of your retirement planning has never been more important. Recent market fluctuations have sparked a lot of questions from our clients about Roth conversions, so we’d like to take a moment to share some key information.
What Is a Roth IRA Conversion?
A Roth IRA conversion means moving funds from a Traditional IRA into a Roth IRA. When you convert, you pay taxes on the amount now in exchange for tax-free growth and withdrawals later. This decision can strengthen your retirement and estate planning strategy, but it’s not one-size-fits-all. Consulting your financial plan, or working with our financial planners to create one, is recommended before making this big of a decision.
Why Convert During a Down Market?
Converting when markets are down can reduce your immediate tax bill because your investments are temporarily valued lower. Capturing future gains inside a tax-free Roth account can be a powerful long-term growth strategy.
Can You Convert Investments “In Kind”?
Yes, you can transfer assets like stocks, mutual funds, and ETFs without selling them first. This keeps you invested in the market and avoids unnecessary transaction costs.
Why Does “In-Kind” Matter?
Staying invested while executing a tax strategy is critical. By converting in kind, you maintain market exposure, avoid timing risks, and sidestep potential fees, all while aligning your investments with your financial goals.
How Does This Impact Estate Planning?
Roth IRAs don’t require minimum distributions during your lifetime, allowing tax-free growth that can benefit your heirs. This flexibility can enhance your estate plan and potentially reduce future tax burdens.
What Happens When Heirs Inherit a Roth?
Heirs can withdraw funds tax-free if the account meets the five-year rule. Under the SECURE Act’s 10-year rule, understanding potential tax implications, such as the “widow’s penalty” and future tax brackets, is essential. These details highlight why personalized planning matters.
Is a Roth Conversion Right for You?
A Roth IRA conversion can be a smart move, especially in uncertain markets, but it depends on your unique circumstances. Most answers aren’t black and white. They require considering as many known variables as possible to make the right recommendation. Reviewing your financial plan or working with our planners to create one is the best way to determine whether this strategy fits your goals.
If you’d like to explore how a Roth conversion could work for you, contact us at Sculati Wealth Management. We’re here to help you navigate these decisions with confidence.