The One Number That Determines a Roth Conversion Decision

Most people have heard some version of this advice:

Convert to a Roth IRA if you think your taxes will be higher in the future.

It sounds simple, but it’s incomplete.

A Roth conversion involves taking pre-tax money from a traditional IRA, paying taxes on it today, and moving it into a Roth IRA where it can grow and be withdrawn tax-free.

But the real decision isn’t just about guessing future tax rates. It comes down to a single concept: your break-even tax rate (BETR).

The BETR is the future tax rate where both strategies—converting to a Roth or leaving funds in a traditional IRA—produce the same outcome.

In this video, we walk through:

• What a Roth conversion is and how it works
• How to calculate your break-even tax rate
• Why the decision is about structure—not speculation
• The key factors that influence whether a conversion makes sense

These factors include:

• How you pay the taxes on the conversion
• Your time horizon
• Whether your IRA includes after-tax contributions
• Broader planning considerations like required minimum distributions and tax flexibility

Two investors in the same tax bracket can reach completely different conclusions, because the real question isn’t just what tax rate you expect, but where your break-even point lies.

If you’d like help evaluating whether a Roth conversion makes sense in your situation, Hanover Advisors can help you analyze the numbers and build a strategy around it.