Are Roth Conversions Necessary? | Cody Garrett and Sean Mullaney | Ep 581

What It Covers

Sean Mullaney and Cody Garrett explain why taxable Roth conversions are rarely necessary despite widespread promotion, examining when they provide benefits versus when traditional retirement accounts already deliver light taxation throughout retirement.

Key Questions Answered

• •Working Years Rule: Avoid taxable Roth conversions during employment years when W2 income already fills higher tax brackets. Conversions stack on top of existing income and face rates of 22% or higher, making them inefficient compared to retirement conversion opportunities.
• •Retirement Tax Reality: Married couples in 2026 can have $133,000 of income taxed only at 0%, 10%, or 12% brackets due to high standard deductions. This creates effective tax rates of 5-8%, contradicting fears about crushing retirement taxation and eliminating conversion urgency.
• •RMD Tax Impact: A widow with $3,680,000 traditional IRA taking $189,700 required minimum distribution at age 81 pays only 21.3% effective tax rate including Medicare surcharges. Only 6% of her RMD hits the 32% bracket, demonstrating even worst-case scenarios remain manageable.
• •Conversion Beneficiaries: Primary beneficiaries of Roth conversions are your 75-plus year old self who is already financially successful and cannot spend the money, or heirs receiving windfalls. Neither represents compelling financial planning priorities compared to current retirement security needs.
• •Backdoor Distinction: Backdoor Roth and mega backdoor Roth contributions differ fundamentally from taxable conversions. These mechanisms move money that would otherwise go to taxable accounts into Roth accounts with minimal tax impact, making them generally advantageous during high-income working years.