MML #035: Why Lawyers Can Finally Breathe on Roth Conversions

Over the last few years, there’s been pressure to rush Roth conversions before tax rates reset. Deadlines loomed, and every year felt like a race against Congress. 

Now, that pressure is gone. With the One Big Beautiful Bill making today’s tax brackets permanent, you can finally make conversion decisions based on your own financial plan—not legislative guesswork.

If you’re new around here, you may be wondering what a Roth conversion is. I’ll save all the details for a future newsletter, but here’s the gist:

A Roth conversion simply means moving money from a traditional IRA into a Roth IRA—paying taxes now so you can enjoy tax-free withdrawals later. For many retirees and pre-retirees, it’s a powerful way to lock in today’s tax rates, reduce future required distributions, and create more flexibility in retirement income planning

The Panic Years Are Over

Since 2017, roth conversions felt like a constant race against time. The Tax Cuts and Jobs Act created lower individual rates, but with an expiration date of December 31, 2025. Everyone knew rates would jump back up unless Congress acted.

That created real pressure. Convert now at 24% or risk paying 28% later. Move money from traditional IRAs at 32% or face 35% down the road. The math was compelling, but the timeline caused stress.

When I talked with legal professionals approaching retirement, many felt torn. Roth conversions made sense, but who wants to make six-figure tax decisions under artificial time pressure?

What Permanent Rates Actually Mean

Now that the brackets are locked in, you can plan conversions like you would any other long-term strategy. No more "beat the clock" mentality.

This changes everything about how we approach the analysis. Instead of asking "should I convert before rates go up," we can focus on better questions:

• What's my expected tax rate in retirement versus now?
• How will my income change over the next 5-10 years?
• Do I want to leave tax-free money to heirs, or would I rather keep the tax deduction today?
• Am I comfortable paying a large tax bill now for potential future benefits?

The Beauty of Multi-Year Planning

With rate certainty, you can spread conversions across multiple years to optimize your tax brackets. Maybe you convert $50,000 annually for five years instead of doing a $250,000 conversion all at once.

Or you can time conversions around your specific situation. 

Planning to retire mid-year? Convert during your low-income months. 

Expecting a large bonus or partnership distribution? Skip conversions that year and resume the following year.

The flexibility is remarkable when you're not racing against legislative changes.

But Don't Get Too Comfortable

I'll be honest with you—"permanent" in tax law doesn't mean forever. Future congresses can always change the rules, and with $3.4 trillion in new spending, tax increases seem likely at some point.

But that's different from having a known expiration date breathing down your neck. You can plan with reasonable confidence while staying flexible enough to adjust if circumstances change.

The Real Conversion Test

Without the artificial urgency, Roth conversions come down to fundamentals:

Do you believe you'll be in a higher tax bracket in retirement than you are now? Then conversions probably make sense, especially if you have time for the tax-free growth to compound.

Are you in peak earning years with high current rates, but expect lower retirement income? Then keeping the deduction today and paying taxes later might be smarter.

But that’s just a start. 

Many neglect the tax-impact of those pesky Required Minimum Distributions that kick in in your 70s. Or maybe flipping the tax bill actually sounds advantageous to you if it means leaving assets tax-free to your beneficiaries. 

Regardless, you have options that now can be considered without feeling the need to rush.

Your New Planning Timeline

The best part about permanent tax rates? You can make conversion decisions when they're right for YOUR situation. Maybe that's this year, maybe it's in three years when you cut back your practice, or maybe it's never.

For the first time in nearly a decade, retirement tax planning doesn't require a crystal ball or a congressional calendar.

Bottom Line

The pressure's off. The rates are set. You can finally plan your retirement strategy based on your goals and timeline—not Washington's.