- Roth individual retirement account conversions can reduce pretax balances and begin tax-free growth.
- But the trade-off is the converted balance boosts your income, which can trigger other tax consequences.
- Higher earnings could cause a “tax torpedo,” or artificially higher rate, due to phaseouts, or benefit reductions, from President Donald Trump’s new tax breaks.
As year-end approaches, many investors are navigating the One Big Beautiful Bill tax changes that apply to 2025 and will impact returns filed in 2026.
The “tax cost” of the Roth conversion could be higher than your marginal tax rate — the bracket that applies to your last dollar of income — according to certified financial planner Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts.
