The Roth Conversion That Wasn’t Worth It
Roth conversions have become something of a financial planning religion lately. Convert now, pay taxes now, let it grow tax-free forever. Simple. Elegant. And for a lot of people, genuinely good advice.
But there is a group of people for whom the Roth conversion math quietly falls apart. That question your advisor should be asking — but often isn't — is: How much do you plan to give to charity?
Let's back up.
The problem Roth conversions are solving
When you retire with a traditional IRA or 401(k), the government has a long memory. Every dollar in that account was contributed pre-tax, and they want their cut. Enter the Required Minimum Distribution — the IRS's polite way of saying "We've been patient, but it's time." Starting at age 73, you must withdraw a minimum amount each year whether you want the money or not. Those withdrawals are ordinary income, taxed accordingly, and can push you into higher brackets, trigger Medicare surcharges, and make more of your Social Security taxable.
A Roth conversion moves money from the pre-tax IRA to a Roth IRA, paying the taxes today at your current rate. The account then grows tax-free, and importantly, Roth IRAs have no RMDs. The premise is that you're trading a tax bill today for a smaller tax bill — or none at all — over the rest of your life.
That trade makes a lot of sense for a lot of people. Unless you're charitably inclined. Then things get interesting.
Enter the QCD — the tool nobody talks about enough
A Qualified Charitable Distribution, or QCD, is one of the more genuinely useful provisions in the tax code, and it is somewhat underappreciated relative to its impact. Here is how it works: once you reach age 70½, you can transfer money directly from your IRA to a qualified charity — up to $108,000 per year in 2025, indexed for inflation — and that transfer counts toward your RMD. The kicker: it never shows up as income on your tax return.
Read that again. The money leaves your IRA, goes to charity, satisfies your RMD, and is not counted as income. Not as a deduction — it simply doesn't exist as far as your taxable income is concerned. This is a different and often better outcome than writing a check to charity and claiming a deduction, because with the QCD you get the benefit even if you take the standard deduction.
For a charitably inclined retiree, the traditional IRA is not a ticking tax bomb. It's a charitable giving account with a government subsidy baked in.
Where the Roth conversion logic unravels
Here is a hypothetical. Say you have $2,000,000 in a traditional IRA and you plan to give $60,000 a year to your church, your alma mater, and a handful of other causes you care about. Your advisor, following the conventional wisdom, recommends converting $150,000 per year to a Roth over the next several years. You pay ordinary income tax on each conversion. The logic is sound: shrink the IRA, reduce future RMDs, pay taxes at today's rates.
At a 2025 RMD factor of roughly 26 years, a $2,000,000 IRA produces an RMD of approximately $77,000 in year one — and grows from there as the balance compounds.
If $60,000 of that is directed to charity as a QCD, only $17,000 of the RMD is taxable income. The IRA shrinks naturally, your taxable income stays low, and the charitable giving costs you nothing in taxes — effectively the same outcome as a conversion, without paying the conversion tax.
Doing a Roth conversion before utilizing QCDs means paying ordinary income tax on dollars that were always going to leave your estate untaxed anyway.
That is not a small thing. At a 22% marginal rate, converting $150,000 per year costs $33,000 in taxes annually. If those dollars were destined for charity via QCD regardless, that's real money — gone, permanently, for no benefit.
But what about my heirs?
A common counterargument goes like this: "Sure, but I'm not giving everything to charity. I have kids. A Roth is better for them than a traditional IRA."
Fair point, and this is where the planning gets precise. The question is not whether a Roth is better than a traditional IRA for heirs in the abstract — it often is — but whether the dollars you're converting are the dollars going to heirs, or the dollars going to charity.
Traditional IRAs are, in many respects, ideal assets to leave to charity and imperfect assets to leave to children. When a charity receives a traditional IRA, it pays no income tax — charities are tax-exempt. When a child inherits a traditional IRA, the SECURE Act now requires them to fully deplete it within 10 years, often during their peak earning years. That can mean withdrawals taxed at 32% or 37%. So the calculus favors pointing traditional IRA dollars toward charity and Roth or after-tax dollars toward heirs.
The irony is that many Roth conversions, well-intentioned as they are, actually work against this goal by shrinking the account you'd ideally like to give to charity.
A framework worth using
Before doing a Roth conversion, it helps to ask a few questions in order:
- What is my charitable intent over the rest of my life? A rough number is fine. Even a ballpark figure changes the analysis significantly.
- How large is my traditional IRA relative to that intent? If your charitable giving could absorb a significant portion of your IRA through QCDs over time, the conversion math changes substantially.
- Who are my beneficiaries, and what are their tax situations? Roth assets going to a child in a lower bracket are less powerful than commonly assumed. Traditional IRA assets going to a charity may be more powerful than assumed.
- What is the conversion doing to my income in the year I do it? Medicare premiums, Social Security taxation, and capital gains rates all interact with ordinary income in ways that make conversions more expensive than the headline rate suggests.
None of this means Roth conversions are bad. For many retirees they are excellent. But "excellent on average" is not the same as "right for you," and the difference between the two often comes down to a conversation about what you intend to do with your money — a conversation that, in our experience, doesn't happen early enough or often enough.
The bottom line
The tax code rewards charitable giving in surprisingly direct ways when the right tools are used. The QCD is one of those tools. It transforms a traditional IRA — which is often portrayed as a liability to be converted away as quickly as possible — into something closer to an asset: a tax-free pipeline to the causes you care about.
If you have significant charitable intent and someone is recommending Roth conversions without discussing QCDs in the same breath, ask why. The answer will tell you a lot about whether the advice is built around your financial picture or around a planning framework that wasn't designed with you in mind.
These are the kinds of details that are easy to miss and expensive to overlook.
Is a Roth conversion right for you?
The answer depends on your full picture — charitable intent, beneficiaries, income, and tax brackets. Let's look at yours.
Schedule a ConversationThis content is for informational purposes only and does not constitute personalized investment, tax, or legal advice. Please consult with a qualified financial professional before making any financial decisions. Retirement Roadmap Financial Planning is a registered investment advisor.
