Key Takeaways
- Conversions have no income limit and no dollar cap — anyone with a Traditional IRA can convert.
- The tax bill is due in the conversion year; pay from cash, not from the IRA.
- Report every conversion on Form 8606 and track each five-year clock.
Before You Convert
A conversion permanently changes the tax character of your money: pre-tax becomes after-tax, and all future growth becomes tax-free. Before moving, confirm three things. First, your marginal rate this year — the tax you pay today is the price of the whole strategy. Second, your cash position — you should be able to pay the tax without touching the IRA. Third, your expected future rate — the conversion wins only if you expect to pay more later. If you hold pre-tax IRAs alongside non-deductible basis, run the pro-rata math first (see our dedicated guide).
Step-by-Step
- Choose the provider. Open a Roth IRA at your preferred brokerage (it can be the same firm as your Traditional IRA).
- Request the conversion online or by phone — specify the exact account and amount; partial conversions are allowed.
- Choose "no withholding" — elect to pay the tax from outside cash, not from the converted amount.
- Verify the transfer — the shares or cash should arrive in the Roth within days; confirm the cost basis transferred correctly.
- Report it — the conversion appears on Form 1099-R; file Form 8606 to report the taxable portion and track basis.
- Calendar the five-year clock — the converted amount is fully accessible five years from January 1 of the conversion year (or at 59½).
Tax Planning Around the Conversion
- Convert in December once your year-end income is known, or in January to lock in the bracket for the coming year.
- Consider converting in two calendar years to split the income.
- If you are 63+ and collecting Medicare soon, watch IRMAA thresholds — a large conversion can raise premiums for two years.
- State taxes apply in most states; a move to a no-income-tax state can make conversions cheaper.
Action Steps
- Run the home-page calculator with your real numbers.
- Confirm your bracket and set aside the tax cash.
- Execute the conversion with no withholding.
- File Form 8606 and keep every 1099-R.
After the Conversion
The work does not end when the money lands in the Roth. First, confirm the 1099-R you receive in January matches the conversion — box 2a (taxable amount) should equal the pre-tax portion; if the custodian coded it wrong, call them before filing. Second, file Form 8606 even if the whole conversion was taxable — the form tracks basis for the rest of your life. Third, check your tax withholding: a large conversion can create underpayment penalties if you did not increase withholding or make estimated payments — the safe harbor is paying at least 100% of last year's tax (110% if your AGI was over $150,000). Fourth, rebalance inside the Roth to your target allocation — the conversion is the perfect moment to fix drift. Finally, add the conversion to your five-year clock spreadsheet and set a reminder to review it each January.
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Use the Calculator →The Complete Conversion Checklist
Execute a conversion in nine steps. (1) Project your income for the year and confirm the conversion keeps you in a favorable bracket. (2) Check the pro-rata rule — total your pre-tax IRA balances; if meaningful, roll them into a 401k first. (3) Decide the amount and whether to split across years. (4) Set aside cash for the tax bill — never withhold from the conversion. (5) Initiate the conversion online or by phone at your brokerage — specify the exact dollar amount or full account. (6) Confirm the conversion date — it counts for the tax year it occurs. (7) Document your basis and keep the year-end statement. (8) File Form 8606 with your tax return. (9) Track the five-year clock for each conversion in a spreadsheet. Rebalance after the conversion so your asset allocation is unchanged, and update your beneficiary designations on the Roth account.