Roth Conversion
Moving money from a pre-tax retirement account into a Roth account, paying tax now so future growth and withdrawals are tax-free.
A Roth conversion transfers funds from a traditional (pre-tax) IRA or 401(k) into a Roth account. You pay ordinary income tax on the converted amount in the year you do it, and in exchange that money grows tax-free and comes out tax-free in retirement, with no required minimum distributions during your lifetime.
The strategy shines in low-income years — especially the gap between retiring and starting Social Security or required minimum distributions, when your taxable income may be unusually low. Converting in those years can fill up low tax brackets cheaply and shrink future RMDs that might otherwise push you into higher brackets later.
Conversions interact with more than income tax. A conversion raises your MAGI, which can reduce ACA health insurance subsidies before 65 and raise Medicare IRMAA surcharges two years later. The real optimization balances the conversion's tax cost now against future RMDs, IRMAA, and subsidies — which is why it's worth modeling year by year rather than converting blindly.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.