If you’ve ever wondered when the right time to make a Roth conversion is, you’re not alone. At Christy Capital Management, we work with federal employees every day who want to take advantage of tax-free growth—but aren’t sure when to make the move.
Here are five strategic windows where converting traditional retirement money to Roth could be a smart financial decision.
1. When the Market Is Down
This one feels counterintuitive. When the market dips, most people feel the urge to hunker down, not make bold moves. But if you’re already planning to do a Roth conversion, a market drop could be your hidden opportunity.
Here’s why: If your account is temporarily lower in value, you’re essentially converting “on sale.” You’ll pay tax on a smaller balance, and if the market rebounds inside the Roth, all that recovery is potentially tax-free.
Example: During the COVID crash in 2020, a $10,000 investment dropped to $6,900. Converting at the lower value meant less tax owed, and when the market bounced back, all the growth happened inside the Roth—no taxes owed on that rebound.
2. When Tax Rates Are About to Rise
If you believe taxes are going up in the future, Roth conversions let you “lock in” today’s lower rates.
Right now, we’re at the tail end of the 2017 Trump tax cuts, which are set to expire in 2026. That means the 22% bracket could go back to 25%, and 24% could become 28%. So if you’re in one of those brackets, converting before the tax rates jump might save you thousands in the long run.
3. After You Retire, But Before RMDs Begin
This is one of the most overlooked windows. Let’s say you retire at 60 but don’t have to start taking required minimum distributions (RMDs) until age 73 or 75. That’s a prime window to do Roth conversions, because your income might be lower, and you can control how much taxable income you show.
One case study showed a couple with $1.5 million in TSP who faced skyrocketing taxable income in their 80s due to RMDs. But by doing Roth conversions during their “retirement runway,” they avoided the RMD tax bomb altogether and preserved more tax-free money for themselves and their heirs.
4. In a Low-Income Year
Unexpectedly low income in a given year? That might be a perfect time to convert more traditional assets into Roth. Lower income = lower marginal tax rate = lower tax bill on the conversion.
Smart planning might even create this low-income window intentionally. For instance, delaying Social Security could give you more space in your tax bracket for larger Roth conversions without triggering higher taxes or Medicare premium surcharges.
5. When You Want to Help Your Heirs Avoid a Tax Bomb
Here’s the uncomfortable truth: If your children inherit your traditional IRA or TSP, they have to empty that account within 10 years, and pay taxes on every dollar they withdraw.
That could push them into much higher tax brackets at a time when they’re already at peak earnings.
By converting to Roth during your lifetime, you’re not just managing your taxes. You’re helping your heirs receive their inheritance income-tax free.
One example we reviewed showed that without Roth planning, a couple passed down $8 million in taxable accounts. With Roth planning? The same amount of wealth, but nearly $20 million was Roth money—completely tax-free to the next generation.
Timing Isn’t Everything. But It’s Close.
The truth is, there’s no one-size-fits-all answer to Roth conversions. But knowing when to consider it can make the difference between a comfortable retirement and an unnecessarily costly one.
If you’ve got $400,000 or more in your TSP and want to explore these strategies for your situation, reach out to us.
Click the green “Talk with an Advisor” button here on our website. We’d love to help you make the most of your next financial move.
