What a Roth IRA actually is
A Roth IRA is a retirement account funded with money you have already paid tax on. Once the money is inside, qualified growth comes out tax-free, and there are no required minimum distributions during your lifetime. That is the whole product. The interesting part is how it fits into everything else.
Most households think of the Roth as a yes-or-no decision made at contribution time. The better frame is to treat it as a bucket you fill on purpose, at the right time, from the right account. The dollars get there in three main ways: direct contributions, backdoor Roth contributions, and Roth conversions. The third one is where most of the money moves for households approaching retirement.
The reason Roth money matters is not the absence of tax. It is the absence of a forced withdrawal schedule. Every other retirement account hands the tax code a deadline. A Roth hands the tax code nothing.
Roth IRA vs traditional IRA, side by side
Most of the comparison questions we hear are really the same question asked six different ways. Here is the honest grid:
| Feature | Roth IRA | Traditional IRA |
|---|---|---|
| Contribution limit (2026) | Same annual cap as traditional | Same annual cap as Roth |
| Tax at contribution | After-tax, no deduction | Pre-tax if eligible — deduction depends on income and workplace plan |
| Tax at withdrawal | Tax-free if qualified | Ordinary income on every dollar |
| RMDs during your lifetime | None, ever | Yes, starting at age 73 |
| Income limits to contribute directly | Phases out above certain income levels | No income limit to contribute — limit is on the deduction |
| Conversion strategy | Receives converted pre-tax dollars | Can be converted to a Roth in any year |
| Estate planning | Heirs get tax-free growth for up to 10 years | Heirs inherit the tax bill with the account |
The table tells you the rules. It does not tell you the answer. The answer depends on which tax bracket you are in today versus which bracket you will be in later — and that almost always comes from looking at the next twenty years at once, not the current one.
The side-by-side is a useful starting point, but the real decision lives inside your own numbers. Our page on how the deduction phase-out works when a workplace plan is in the picture walks through the other side of the same question.
How a Roth conversion earns its keep
A Roth conversion takes money from a pre-tax account like a traditional IRA, pays ordinary income tax on the amount you move, and deposits the after-tax result into a Roth. You are volunteering to pay tax now to avoid paying more tax later. That trade only earns its keep under one condition: the bracket you pay now is lower than the bracket the same dollars would have paid later.
For most households that condition is true for a short window. It opens the year you retire and closes the year RMDs begin. Inside that window, ordinary income often drops — no paycheck, Social Security maybe deferred, part-time work or none at all. A household that spends the decade in the twelve percent bracket has room to move real money into a Roth at twelve percent before the RMDs push them into twenty-two or twenty-four.
The conversion is sized by the ceiling, not by instinct. We map your taxable income for the year, figure out how much headroom you have before the next bracket, and convert to that number. Some years we convert nothing. Some years we convert six figures. The point is that the ceiling is different every year and the plan has to move with it.
The gap years between retirement and RMDs are also where the claiming decision shows up. A conversion plan is hard to build without also mapping the years you delay Social Security to keep brackets low — the two decisions live in the same window for most households.
The mistakes we see most often
None of these are exotic. All of them are common, and all of them are expensive.
- Converting to a round number instead of to the top of a bracket. Two thousand dollars in the wrong bracket can cost more than the entire conversion was meant to save.
- Forgetting about Medicare IRMAA. A large conversion two years before the year you enroll in Medicare can raise your Part B and Part D premiums in a way nobody warned you about.
- Doing a backdoor Roth while a rollover IRA is sitting in the background. The pro-rata rule blends the two accounts for tax purposes and turns a clean contribution into a partial mess.
- Paying the conversion tax out of the IRA itself. Every dollar you pull to cover taxes is a dollar that never made it to the Roth, and it is usually the wrong move.
- Converting in December with no time to undo a mistake. Recharacterization is no longer allowed — the conversion is permanent, which is why the math has to happen before the money moves.
Conversion planning is not a one-day event. It is the same piece of math repeated every year, and it fits inside a year-round tax plan that treats the return as a byproduct, not a deadline.
“A Roth conversion is one of the few financial decisions where doing nothing in January can cost you more than doing the wrong thing in December.”
The Roth conversation belongs to the broader work of planning an income in retirement. The conversion is a tool inside the plan, not the plan itself.
What working with us looks like
First meeting — the bracket map
We meet in person in Paramus, at your home, or at your workplace. We pull a bracket map of your next ten years — income, Social Security timing, RMD start, any one-off events like a business sale or a pension start. By the end of the hour you can see where the conversion windows are.
Second meeting — the written conversion plan
You leave with a year-by-year written conversion plan: how much to convert each year, which bracket it fills, and what the downstream effect is on Medicare premiums and the surviving spouse's bracket. If the math does not earn the conversion, we will say so — and we will put it in writing.
A note on fit
When this might not be right for you
A Roth conversion strategy is not for every household. Some of the people we are not the right fit for:
- Anyone already in the top federal bracket with no expectation of a lower-income window. There is usually nothing to convert into.
- Anyone who needs the pre-tax money for spending in the next two or three years. The conversion tax plus the loss of the growth inside the IRA makes it a bad trade.
- Anyone looking for a firm that will sell them a Roth conversion every year on reflex because the CPA across the hall recommended it. We run the math each year from scratch.
If the math points to a zero-dollar conversion this year, that is still a plan. Honesty is cheaper than the alternative.
Frequently asked questions
What is the difference between a Roth IRA and a traditional IRA?
A Roth IRA is funded with after-tax dollars and comes out tax-free in retirement with no required minimum distributions. A traditional IRA is usually funded with pre-tax dollars, grows tax-deferred, and is fully taxable on withdrawal with RMDs starting at age 73. The right choice depends on whether your tax bracket today is higher or lower than your expected bracket in retirement.
When does a Roth conversion make sense in New Jersey?
A Roth conversion usually makes sense in years when your marginal tax bracket is temporarily low — often between retirement and the start of required minimum distributions at age 73. The conversion is sized to fill your current bracket without overflowing it, and the tax is paid in the year of the conversion. We run the math before any money moves.
How much should I convert to a Roth IRA each year?
The right amount is set by the ceiling of your current tax bracket, not by a fixed dollar number. We map your taxable income for the year, find the headroom before the next bracket, and convert up to that line. The number changes every year, which is why the plan has to be reviewed every year.
What is a backdoor Roth IRA and does it still work?
A backdoor Roth is a two-step process: a nondeductible contribution to a traditional IRA followed by a conversion to a Roth. It is still legal and still works, but the pro-rata rule blends your other pre-tax IRA balances into the conversion math. If you have a rollover IRA from an old 401(k), the backdoor gets messy fast.
Can I contribute to a Roth IRA if my income is too high?
Direct Roth contributions phase out above certain income levels. High earners can still get money into a Roth through a backdoor contribution, a mega-backdoor inside a 401(k) plan that allows it, or a Roth conversion from a traditional IRA. The rules are specific and the order of operations matters.
Will a Roth conversion raise my Medicare premiums?
It can. Medicare Part B and Part D premiums are set based on your adjusted gross income from two years earlier, through a surcharge called IRMAA. A large conversion in the year before you enroll in Medicare can raise your premiums for one or two years. We build the IRMAA effect into the conversion plan instead of finding it in the mail later.
Do you charge a commission to set up a Roth IRA?
No. We are fee-only fiduciaries, which means we accept no commissions of any kind. We charge a transparent planning or advisory fee that we publish in writing before you agree to anything. Opening a Roth IRA or running a conversion plan pays us the same whether we recommend a dollar of conversion or none.