Kiplinger Urges Roth IRA Conversions After 20% Drops to Cut Future Tax Bills
Updated
Updated · Kiplinger's Personal Finance · Aug 4
Kiplinger Urges Roth IRA Conversions After 20% Drops to Cut Future Tax Bills
1 articles · Updated · Kiplinger's Personal Finance · Aug 4
Summary
Down-market Roth conversions can shrink the immediate tax hit because investors pay tax on a lower account value while moving the same number of shares into a tax-free account.
A $100,000 traditional IRA that falls 20% to $80,000 could be converted while recognizing only $80,000 of taxable income, leaving any rebound to compound inside the Roth.
Tax advisers say the strategy works best when lower asset prices coincide with a lower-income year, but they warn conversions should not push savers from the 22% or 24% bracket into 32%.
Investors can limit that risk by converting only part of an IRA, paying the tax bill with outside cash, and watching Medicare IRMAA thresholds of $109,000 for singles and $218,000 for couples.
Kiplinger expects the second half of 2026 to stay strong overall, though weakness in areas such as AI could still create selective conversion opportunities.