Introduction: Why Roth Conversions Are Back in the Spotlight

 

Roth IRA conversions have always been about trading a known, manageable tax bill today for permanent tax-free growth tomorrow. But 2025 has put conversions on every serious planner’s radar: (1) the One Big Beautiful Bill looks to extend the tax reductions from the Tax Cuts and Jobs Act (“TCJA”) and individual brackets no longer look like they will sunset after December 31, 2025, and (2) the SECURE 2.0 Act continues to tilt the playing field toward Roth money by removing RMDs from workplace Roth accounts and reshaping catch-up rules.

 

High-earning Atlantans in Midtown, Buckhead, East Cobb, and Alpharetta face another 3-year window to fill low brackets. Converting in the next 18 months can create a lifetime shield against higher ordinary-income taxes, mandatory distributions, and unexpected estate-tax exposure.

 

Roth IRA 101: The Essence of a Conversion

 

A conversion simply moves pre-tax dollars (Traditional IRA, 401(k), SEP, SIMPLE) into a Roth IRA. The moved amount is treated as ordinary income in the year of conversion; once inside the Roth, growth and future withdrawals (if the five-year/age-59½ rules are met) are federal- and Georgia-income-tax-free. No income limits apply to conversions, making them a “back-door” Roth for high earners whose AGI is too high for direct contributions.

 

Timing Pressure: The Looming Sunset of TCJA

Today’s top marginal bracket is 37 % for married couples filing jointly. Older Atlantans often discover that their “retirement bracket” may be higher than their working-years bracket once RMDs, Social Security, and taxable portfolio income stack up. A series of partial conversions in 2025 can lock in known brackets, preventing a forced acceleration of taxable income later.

 

SECURE 2.0 Act: New Rules That Nudge You Toward Roth

Key 2025 changes:

• No RMDs from Employer Roth Accounts – Beginning 2024, Roth 401(k)/403(b) balances are exempt from required minimum distributions, harmonizing them with Roth IRAs.
• Catch-Up Contributions Go Roth for High Earners – Starting in 2025, catch-up contributions for employees age 60-63 must be Roth if their prior-year wages exceed $144,999 (indexed).
• Higher Catch-Up Limits – Those same 60- to 63-year-olds may contribute the greater of $10,000 or 150 % of the regular catch-up—again, potentially Roth-only.

These provisions gently push pretax savers toward Roth territory and make conversions a natural complement.

 

Mechanics: How to Execute a Conversion Smoothly

1. Know Your RMD First Rule – If you’re already subject to RMDs (generally age 73+ in 2025), you must take the RMD from each Traditional IRA before converting any remaining balance. Failure triggers a 25 % penalty (down from 50 %).
2. Aggregate, Don’t Commingle – Convert directly trustee-to-trustee. A 60-day rollover risks withholding and the one-per-year rollover rule.
3. Estimate Tax Impact – Add the conversion amount to your projected AGI, model federal and Georgia tax, Medicare IRMAA, and Net Investment Income Tax.
4. Withholding Strategy – Pay conversion tax with outside cash, not from the IRA itself, to keep the full amount growing tax-free.
5. File Form 8606 – Tracks basis and conversion amounts; crucial for back-door Roth users.

 

Georgia-Specific Tax Considerations

• No Extra State Penalty – Georgia conforms to federal Roth rules; the conversion is taxable for state purposes the same year.
• Retirement Income Exclusion – From age 65, Georgia excludes up to $65,000 of retirement income per person ($130,000 joint). Converting before age 65 maximizes the exclusion’s value later.
• State Estate Tax – Georgia repealed its estate tax, but a Roth IRA still reduces the size of the taxable estate for federal purposes and sidesteps beneficiaries’ state income tax elsewhere.

 

Estate-Planning Upside: A Gift to Your Heirs

 

A Roth IRA can function like a private “family endowment.” SECURE Act 1.0’s 10-year payout rule compresses inherited IRA distributions, but heirs of a Roth get 10 years of tax-free compounding rather than taxable income spikes. For a $2 million Roth passing to three adult children, converting could save them over $500,000 in combined federal and Georgia tax versus inheriting a Traditional IRA in the 32 % bracket. Moreover, a Roth never forces widowed spouses into the single filer’s harsher brackets due to RMDs.

 

Medicare & Social Security Coordination

 

Conversions increase modified AGI in the conversion year, which can push retirees into higher Medicare Part B/D premium tiers (IRMAA) two years later. Yet the trade-off is often worth it: by eliminating future RMDs, you lower lifetime IRMAA surcharges and reduce the portion of Social Security benefits subject to tax. A careful stair-step conversion schedule—e.g., filling the 24 % bracket each year—usually produces a lower cumulative IRMAA bill than status-quo RMDs.

 

Case Study: Midtown Couple Ages 60 & 58

 

Profile: Married, AGI $260,000, $1.8 M in Traditional IRAs, $200k Roth, $50k brokerage income, expects $50k/year pensions, no state estate tax but concerned about future brackets.

Plan: Convert $160,000 in both 2025 and 2026—enough to top the 24 % bracket without entering the 32 % bracket. They pay tax from cash reserves. By age 73, their projected Traditional IRA is under $800k, cutting RMDs almost in half and dropping their future Part B premium tier. Heirs inherit roughly $2.5 M of Roth (assuming 6 % growth) and can withdraw tax-free through 2035. Total lifetime tax saved vs. no conversion: ≈$380,000.

 

Advanced Tactics for High-Net-Worth Georgians

• Bracket-Bumping “Filler” Conversions – Convert just enough each year to reach the top of a target bracket, then stop.
• After-Retirement-Before-RMD Window – Ideal if you retire in your early 60s with a temporarily lower AGI.
• Roth-in-Kind Conversions of Depressed Assets – Move beaten-down real estate investment trusts or private funds into a Roth, allowing any rebound to be tax-free.
• Family Tax-Rate Arbitrage – Parents in high brackets can gift cash for younger-generation conversions (or pay their conversion tax) using the annual exclusion.
• Trust as Roth Beneficiary – With careful conduit or accumulation trust drafting, a Roth can fund long-term trusts for minors or spendthrift heirs without leaking tax.

 

Pitfalls and How to Avoid Them

Pitfall	How It Hurts	Mitigation
Overshooting Your Bracket	32 %+ federal plus 5.75 % GA tax may negate benefits.	Precision modeling, staggered conversions.
IRMAA Surprises	Part B premium jump to $279/month (2025 tier).	Keep MAGI below tier thresholds, spread conversions.
Liquidity Crunch	Paying tax from IRA reduces amount converted.	Use non-qualified cash or lines of credit.
Misplaced Basis	Nondeductible IRA basis lost in pro rata rule.	Use clean IRA, back-door Roth hygiene, file 8606.
Inherited IRA Rule Misunderstanding	RMD-first rule for decedents over RBD.	Estate admin review, coordinate with counsel.

 

 

Conclusion

 

Roth conversions are not a magic wand—poorly timed, they can raise today’s tax without enough years left to compound the benefit. But executed thoughtfully, they are one of the few irrevocable moves that can permanently lower your family’s lifetime tax, simplify estate administration, and insulate heirs from bracket creep.

 

If you have more than $500,000 in pre-tax retirement accounts and anticipate higher tax rates—or simply dislike forced RMDs—the next few years may be your best (and possibly last) low-bracket opportunity. Slowik Estate Planning crafts custom conversion roadmaps that integrate income-tax modeling, Medicare analysis, and multi-generation trust design—all under one roof here in Atlanta.

 

Ready to run the numbers? Contact Slowik Estate Planning today to schedule a complimentary Roth conversion consultation before year-end. Your future self—and your heirs—will thank you.

Disclaimer: This blog is for educational purposes only and does not constitute tax or legal advice. Consult your tax advisor before undertaking a Roth IRA conversion.