KEY TAKEAWAYS

• Roth conversions are a tax timing decision, not a tax avoidance strategy. You're choosing to pay ordinary income tax now in exchange for tax-free growth and withdrawals later — and that trade only makes financial sense when your current rate is meaningfully lower than what you'd pay in the future.

• The conversion window matters more than the IRA balance. The most valuable opportunities appear during temporary income drops: the early retirement years before Social Security and RMDs begin, or the period after a business sale when earned income disappears entirely. Missing these windows is one of the costliest planning oversights for high-net-worth families.

• Modeling only the current year's tax return is how this strategy goes wrong. For high earners, a Roth conversion intersects with RMD projections, Medicare IRMAA surcharges, state income taxes, estate documents, charitable intent, and heir-level tax exposure — and those variables have to be worked through together, not separately.

Most high earners come to this question with the wrong frame. They ask, "Should I convert?" when the better question is: what tax rate am I likely to pay today versus what I'm trying to avoid later, and does converting now actually close that gap?

Roth conversions don't work the same way for someone in the 22% bracket as they do for someone whose income regularly pushes into the 37% federal bracket plus state tax plus Medicare surcharges. The mechanics are the same. The math is not.

This is written for executives, business owners, and affluent pre-retirees who have built significant balances in traditional IRAs or 401(k)s and are trying to figure out whether — and when — converting some of that money into a Roth makes sense. If you've already been told "just do the conversion," but nobody ran the numbers on your full income picture, this is the framework that fills that gap.

What follows covers what a Roth conversion actually is, why it's more complicated for high earners, the specific situations where it makes strong sense, the ones where it clearly doesn't, and how to think about the decision across your full financial picture rather than just a single year's tax return.

What a Roth Conversion Actually Is (and What It Isn't)

A Roth conversion moves money from a pre-tax retirement account — a traditional IRA, SEP IRA, or 401(k) — into a Roth IRA. The converted amount is added to your ordinary income for that year, reported on Form 8606, and taxed at your marginal rate. Once it's inside the Roth, it has the potential to grow tax-free and be withdrawn tax-free on qualified distributions. Decisions like this one typically sit alongside the broader set of services Endeavor's advisory process covers, from tax planning to retirement income strategy.

This is not the same as a Roth IRA contribution, and that distinction matters specifically for high earners. Direct Roth contributions are income-limited — above certain thresholds, you're phased out entirely. Roth conversions operate under separate rules. A high-income executive who can't contribute directly to a Roth IRA can still convert traditional IRA assets. The contribution door can be shut while the conversion door stays open.

The catch, of course, is that you're paying tax on every dollar you move. The conversion is only beneficial if the tax cost today is lower than the tax you'd pay later. That's the entire decision.

Why This Is More Complex for High Earners

For someone with moderate income, the Roth conversion decision can be fairly clean: income is low now, future RMDs will be large, so converting at today's lower rate makes obvious sense. For a high-earning executive or business owner, that same logic rarely applies without significant qualification.

The question isn't whether Roth accounts are attractive in the abstract. They almost always are. The question is: at what tax cost are you buying one, and is that cost worth it given what you'd realistically pay later?

Several factors raise the hurdle rate for high earners specifically:

• Peak income years stack multiple sources at once. Wages, RSUs, bonuses, K-1 income, deferred compensation, and business distributions can all land in the same tax year. Layer a large conversion on top of that, and you're looking at ordinary income taxed at the highest federal marginal rate. That's not strategic tax planning — that's acceleration.

• State income tax changes the math considerably. Federal-only modeling misses a meaningful piece of the picture. In a state with a 10–13% income tax, the combined rate on a Roth conversion during a high-income year can push well above 50%. That changes whether any future tax savings can justify the current cost.

• Medicare IRMAA adds a hidden surcharge layer. For clients who are retired or nearing retirement, conversion income increases modified adjusted gross income (MAGI), which determines Medicare Part B and Part D premium tiers. IRMAA uses income from two years prior, so a large conversion today affects premiums two years forward. Crossing a threshold can add thousands in annual premiums — a cost that rarely shows up in a simple bracket comparison.

• The liquidity question is often underestimated. Conversions work best when the tax bill is paid from outside assets — not withheld from the IRA itself. Withholding from the account reduces the amount entering the Roth and limits the compounding benefit. If your wealth is concentrated in a business, real estate, or appreciated stock with limited liquidity, a conversion may be impractical regardless of how good the model looks on paper.

When a Roth Conversion Strategy Actually Makes Sense

The best Roth conversion opportunities have one thing in common: they appear during windows when income is temporarily lower than it will be again. Recognizing those windows — and acting on them deliberately — is the highest-value part of this strategy.

The Early Retirement Gap Before RMDs and Social Security Begin

For most affluent retirees, the years between retirement and age 73 represent the strongest conversion window they'll ever have. You've stopped earning W-2 or business income. Social Security hasn't started yet (especially if you're delaying to 70 for the higher benefit). Required minimum distributions haven't kicked in. Income is, for a brief period, meaningfully lower than it's been in decades and will be again once RMDs begin.

This is the window. Using it well means converting enough each year to fill available bracket space without triggering the next IRMAA tier or pushing into a materially higher marginal rate.

After a Business Sale — But Not in the Sale Year Itself

Business owners frequently ask whether the year they sell is the right time to convert. Almost always, the answer is no. The sale year is overloaded: gain recognition, deal expenses, earnout payments, and deferred compensation payouts all tend to land at once. The real opportunity is typically in the one to three years that follow, once business income has disappeared and the overall income picture normalizes. The conversion window that opens after a sale can be significant — but only if it's planned for in advance, not discovered after the fact.

When RMDs Will Create Forced Taxable Income You Don't Need

Required minimum distributions begin at age 73 for most pre-tax retirement accounts. For affluent households that don't need those distributions for living expenses, RMDs become forced taxable income — income that compounds the tax situation whether it's useful or not.

If a projected RMD schedule is going to push you into a higher bracket, add strain on a surviving spouse's tax picture after filing status changes, or create IRMAA exposure year after year, reducing the pre-tax IRA balance through conversions before 73 is often worth the earlier tax cost.

The surviving spouse dynamic is one of the most underplanned pieces of this picture. When one spouse dies, the survivor files as single — but the IRA doesn't shrink and RMDs don't stop. The brackets compress significantly, often turning a manageable RMD into a serious tax problem for the surviving spouse. A systematic conversion program during the couple's early retirement years can meaningfully improve that outcome.

When the IRA Is Likely to Be an Inheritance, Not a Spending Account

For high-net-worth families who don't expect to spend down the IRA in their lifetimes, a Roth conversion shifts from being a retirement tax decision to an estate planning decision. The question becomes: what tax will our heirs pay when they inherit this account?

Pre-tax IRA assets can be a difficult inheritance under post-SECURE Act rules. Most non-spouse beneficiaries must empty inherited accounts within 10 years. If those heirs are high earners themselves, drawing down a large inherited traditional IRA during their own peak income years means stacking ordinary income at exactly the wrong time. The family ends up paying full freight — once in the estate, again in the heirs' income tax returns.

• Heir tax exposure: Inheriting a large traditional IRA during peak earning years creates a compressed 10-year distribution window that stacks ordinary income at the worst possible time.

• Estate reduction through tax payment: Paying the conversion tax from outside taxable assets reduces the taxable estate directly while moving future growth into a tax-free Roth structure.

• Beneficiary coordination is non-negotiable: Roth conversions should be coordinated with trust language, beneficiary designations, and estate documents. Treating the conversion as an isolated account decision while the estate plan is handled separately is one of the most common ways this strategy fails.

When a Roth Conversion Is the Wrong Move

Not every situation calls for a conversion. For high earners, the wrong timing doesn't just produce a suboptimal outcome — it can mean accelerating a significant, permanent tax bill with nothing to show for it.

• When income is at or near peak: If wages, bonuses, RSUs, K-1 income, and business distributions are filling the top brackets, adding a conversion accelerates tax at the worst possible rate. In those years, the answer is almost always to wait.

• When charitable intent is meaningful: Pre-tax IRA assets often belong to charity, not to the conversion schedule. Charities don't pay income tax on inherited IRA assets. If a portion of the traditional IRA is headed toward a donor-advised fund or charitable bequest anyway, converting it first means paying tax on money that was never going to be taxed. That's solving a problem that doesn't exist.

• When retirement income will be materially lower: A corporate executive in the final years of peak W-2 earnings may end up in a substantially lower bracket in retirement once earned income stops. Converting now at the top rate to avoid a lower future rate is the opposite of what the strategy is supposed to accomplish.

• When liquidity isn't there to pay the tax externally: If the only way to fund the tax on a conversion is to withhold from the IRA itself, the math deteriorates. Fewer dollars enter the Roth, and the compounding benefit shrinks accordingly. In those situations, it usually makes more sense to wait until outside liquidity improves.

Two Scenarios: Same IRA, Very Different Answers

The following illustrates why timing changes everything — and why the IRA balance alone tells you almost nothing about whether a conversion makes sense.

*Figures are illustrative. Individual results will vary based on income, account balances, state of residence, estate structure, and other factors. Projected RMDs are estimates based on current IRS life expectancy tables and are subject to change.

In Scenario A, the couple has a clean multi-year window — potentially eight or more years — to convert systematically, filling available bracket space each year while monitoring IRMAA thresholds and keeping the conversion tax funded from outside assets. In Scenario B, doing the same conversion today means paying 37% federal plus state tax plus potential IRMAA on every dollar moved. Waiting two or three years for the income to drop produces the same Roth assets at meaningfully lower total cost.

Same strategy. Different timing. Very different financial outcome.

How to Make the Roth Conversion Decision: A Framework for High Earners

There's no universal answer here — and that's the point. Whether a conversion makes sense in any given year depends on variables that interact with each other and have to be modeled together, not checked off one at a time.

Convert more aggressively when:

• Current income is temporarily low relative to your long-term average

• Future RMDs are projected to create forced taxable income you don't need

• Heirs are likely high earners who would inherit a large pre-tax account at the worst possible time

• Estate reduction through tax payment outside the IRA is a priority

• You have adequate outside liquidity to fund the tax without touching the IRA

Convert less or wait when:

• Current income is at or near peak from multiple stacking sources

• Available liquidity is limited and the tax would need to come from the IRA itself

• Medicare IRMAA surcharges would be triggered by conversion income

• Charitable intent means a significant portion of the IRA was never going to generate income tax anyway

• Retirement income will be materially lower than current income, making today's rate unjustifiably high

Revisit the decision every year. Income changes. Markets move. State residency changes. Family goals shift. A conversion that made no sense last year may be exactly right this year after a bonus year ends, a business sale closes, or a portfolio rebalancing creates taxable events elsewhere. The model needs to be refreshed annually, not set and forgotten.

FAQ: Roth Conversion Strategy for High Earners

Can high earners do Roth conversions if they're phased out of direct Roth contributions?

Yes. Roth IRA contribution eligibility and Roth conversion eligibility operate under completely separate rules. Direct contributions are income-limited — above the phase-out thresholds, you can't contribute directly. But conversions have no income limit. A high-income executive who is fully phased out of direct Roth contributions can still convert traditional IRA assets. These two rules are often conflated, and the confusion causes people to assume the door is closed when it isn't.

Does a Roth conversion ever make sense if I'm already in the 37% federal bracket?

Yes, but the hurdle rate is high. At the top federal bracket — especially combined with state tax and potential IRMAA — the future tax savings need to be compelling to justify the current cost. The most defensible reasons to convert at peak rates are: heir tax exposure from a large inherited pre-tax account, estate planning benefits from reducing the taxable estate, and a surviving spouse scenario where future bracket compression is severe. Converting at the top rate purely to get "tax-free growth" without modeling the full picture is usually a mistake.

What's the best time window to execute a Roth conversion strategy?

For most high earners, the best window is the early retirement years before Social Security and RMDs begin — roughly between ages 60 and 73, depending on your retirement date and when you elect to start Social Security. During that window, earned income has stopped but RMD obligations haven't started, creating a period of temporarily lower income and real bracket availability. A second strong window exists in the years immediately following a business sale, once the sale-year income spike has cleared.

How do Roth conversions affect Medicare premiums?

Conversion income increases your modified adjusted gross income (MAGI), which determines Medicare IRMAA calculations for Part B and Part D. IRMAA uses income from two years prior, so a large conversion today will show up in your premium calculation two years from now. The surcharges can be significant — potentially thousands of dollars annually per tier crossed. Any conversion strategy for retirees or near-retirees should model IRMAA thresholds explicitly and build them into the annual conversion cap.

Should a Roth conversion be coordinated with estate planning documents?

Yes — and this is one of the most commonly missed connections. Roth conversions change the character of assets that pass to heirs, and the impact flows directly through beneficiary designations and trust structures. If your estate documents are directing pre-tax IRA assets to heirs who are high earners, a conversion may reduce their income tax burden significantly. If those same assets are directed toward charity, converting them first creates a tax bill that didn't need to exist. The conversion decision and the estate plan need to be reviewed together.

What happens to an inherited Roth IRA vs. an inherited traditional IRA under current law?

Under post-SECURE Act rules, most non-spouse beneficiaries must empty inherited retirement accounts within 10 years. For an inherited traditional IRA, that means drawing down the entire balance as ordinary income over a compressed window — often during the heir's own peak earning years. For an inherited Roth IRA, the same 10-year distribution requirement applies, but qualified withdrawals are income-tax-free. The difference in after-tax value for a high-earning heir can be substantial, which is why estate-oriented Roth conversions are worth modeling even when the original account owner's own tax situation doesn't create a compelling case on its own.

What is the most common Roth conversion mistake high earners make?

Converting during peak income years — paying the highest possible combined marginal rate to get a tax benefit that could have been obtained much more cheaply by waiting. The second most common mistake is treating the conversion as a one-time event rather than a multi-year strategy. Bracket management across five to ten years produces far better outcomes than a single large conversion in any one year. Both mistakes typically share the same root cause: the decision was made without modeling the full income picture, IRMAA exposure, estate plan, and liquidity constraints together.

Does it make sense to do a partial Roth conversion rather than converting all at once?

Almost always, yes — for high earners, partial conversions are the norm, not the exception. The goal is to fill available bracket space each year without triggering the next marginal rate tier or crossing an IRMAA threshold. A large single conversion is usually less efficient than five to eight years of disciplined, annual bracket-filling. The exception is when there's a compelling estate or liquidity reason to convert a larger amount quickly, but even then, the tax cost of acceleration needs to be modeled against the planning benefit.

Is a Roth Conversion Strategy Right for You?

This strategy has the highest value for high earners who are approaching — or have recently entered — a period of meaningfully lower income relative to their peak years. That typically means someone who has recently retired or is within five years of doing so, owns a large traditional IRA or 401(k) balance that would generate significant RMD pressure starting at 73, has heirs who are likely to be in high tax brackets when they inherit, and has adequate outside liquidity to fund conversion taxes without touching the IRA itself.

The planning is most consequential when all of those factors are present at once — and most impactful when addressed before the low-income window opens rather than after it's been partially spent.

If you're in or approaching a retirement transition, recently completed a business sale, or watching a large pre-tax IRA balance grow while your income stays high, that's the moment to model this decision with the full picture in front of you — not a simple bracket comparison. These are the kinds of situations that tend to come up early in a conversation with Endeavor.