If you’re a successful professional with substantial retirement savings, you’re probably already shouldering a heavy tax burden. According to the Tax Policy Center, the top 5% of earners pay an average federal tax rate of 28%—nearly six times what the bottom 40% pays. Despite this, political pressure to raise taxes on higher earners shows no signs of letting up.
Here’s what most people miss: while you may pay 28% in taxes overall, you can convert IRA dollars to Roth at marginal rates of just 22% or 24%. This gap creates a powerful planning opportunity—but it may not last.
Understanding the Opportunity
A Roth conversion means moving money from your Traditional IRA or 401(k) to a Roth IRA. You pay income tax now, but all future growth becomes tax-free forever. No required withdrawals. No taxes in retirement. Tax-free inheritance for your heirs.
The math is compelling: Converting $100,000 today at a 22% rate costs $22,000 in taxes. If rates increase to just 25% in five years—a modest 3% bump—waiting will cost you approximately $23,000 in additional opportunity costs over 35 years. For larger conversions, the benefit scales proportionally.
Why Act Now?
The Tax Cuts and Jobs Act lowered brackets significantly, and the One Big Beautiful Bill Act of 2025 made these rates “permanent.” But history teaches us that permanent tax laws change when fiscal pressures mount—as they did in 1990, 1993, and 2013.
Individual tax revenue is actually strong according to OMB data, but corporate tax revenue has collapsed from 4.6% of GDP in the 1950s to just 1.8% today. The burden has shifted heavily toward individual taxpayers. With persistent deficits and growing political pressure to “tax the wealthy,” the current favorable rate structure may not survive the next fiscal crisis.
Is This Right for You?
Roth conversions work best for people ages 40-60 currently in the 22-24% tax brackets with substantial pre-tax retirement accounts and the ability to pay conversion taxes from non-retirement savings. The strategy requires careful planning—converting too much pushes you into higher brackets, defeating the purpose.
This isn’t about avoiding taxes—you already pay your share. It’s about locking in today’s favorable rates before they potentially increase. Every dollar of tax you save today is a dollar that can keep working for you instead of going to the IRS.
As a CERTIFIED FINANCIAL PLANNER™ professional and member of Ed Slott’s Master Elite IRA Advisor Group, I specialize in helping clients navigate these complex retirement account decisions. If you’d like to explore whether Roth conversions make sense for your situation, schedule your no-risk consultation with Julia.
Don’t wait for tax rates to rise. Let’s discuss your strategy today.
Julia Peloso-Barnes, CFP® , is a Sr. Wealth Adviser and Founder of Prism Planning and Solutions Group, a dba of PPSGRP (PPS), a Registered Investment Advisor. .Julia is also a member of the Ed Slott Master Elite Advisor Group and has been helping clients seek empowerment through collaborative problem-solving for more than 30 years. Learn more here.
Neither Prism Planning and Solutions Group nor PPS provides tax or legal advice, and nothing in this communication should be treated as such. This communication should not be interpreted as a recommendation for a specific investment, legal or tax-planning strategy. We provide this material for informational purposes only. We have made every attempt to verify that the information contained in this communication is accurate as of the date published but make no warranties. Before making any decisions related to your own tax, legal and/or investment situation you should consult the appropriate professionals.   Â
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.Â
