Curious About a Roth Conversion Strategy? When It Actually Makes Sense (Or Not)

April 17, 2025

“Should I convert my traditional IRA or 401(k) to a Roth?”


If you’ve asked yourself this question lately, you’re in good company. Perhaps you’re a high-earner who makes too much to contribute directly to a Roth IRA but wants access to tax-free growth. Or maybe you’re concerned about future tax rates and want to ensure more tax-free income in retirement.


With market volatility and changing tax laws on the horizon, many of our clients are wondering if a Roth conversion could be a smart money move to save on taxes and provide more flexibility down the road.


While we think Roth conversions are a great strategy, they don’t make sense for everyone. Let’s break down when Roth conversions actually make sense — and when they don’t — in plain English.


Back to Basics: What is a Roth IRA?


Before we dive into strategy, let’s recap the differences between a Roth retirement account and a traditional one.


Traditional retirement accounts, such as a traditional IRA or 401(k), provide you with a tax deduction when you contribute. You save on taxes now, but you’ll pay taxes on that money in the future when you withdraw it as income in retirement.


A Roth IRA allows you to contribute money that you’ve already paid income taxes on. You don’t enjoy savings this year, but the interest you earn on that money grows tax-free, and the withdrawals are 100% tax-free in retirement once you meet certain eligibility requirements. 


For many people, these lifetime tax savings are significantly greater, which is why a Roth conversion is such an intriguing strategy.


What Is a Roth Conversion?


Imagine you’ve been making retirement contributions to a traditional 401(k) for the past 25 years. You’ve enjoyed income tax deductions each year as you squirrel away money for your future.


But as you’re scrolling through your newsfeed one night after dinner, you come across an article about the unexpected tax bills many retirees are faced with in retirement, significantly eating into their retirement income. The article suggests making contributions to a Roth account instead, in order to avoid this scenario in the future.


But you’ve already been making contributions to a traditional account for 25 years. 


Have you missed out?


Not necessarily. With a Roth conversion, you can move money from another retirement account, such as a Traditional IRA or 401(k), into a Roth IRA. Essentially, a Roth conversion allows you to “pre-pay” taxes so your future self won’t have to. For many people, this can be a smart move.


But there are caveats: Convert too much at once, and you might push yourself into a higher tax bracket this year. Convert too little over time, and you might miss opportunities to lower your lifetime tax bill. The challenge lies in finding the right balance.


When Roth Conversions Make Sense


In general, Roth conversions can make sense for individuals in the following circumstances:


1. You’re a High Earner

For 2025, direct Roth IRA contributions are phased out for single filers with incomes between $150,000-$165,000 and for joint files with incomes between $236,00-$246,000. If your income exceeds these thresholds, you can’t contribute directly to a Roth IRA.


However, Roth conversions have no income limits. This creates a powerful opportunity for high-income earners to still enjoy tax-free growth in retirement. By making non-deductible contributions to a traditional IRA (which has no income limits) and then converting those funds to a Roth IRA — often called a “backdoor Roth” — you can effectively circumvent the income restrictions.


2. You’re in a “Tax Valley”

You may be in a “tax valley” if you’re currently experiencing a period where your income is lower than you expect in the future. For example, you may be early in your career, taking a sabbatical from work, or starting a business. These can all be opportune years to make a Roth conversion.


New retirees may also find themselves in a temporary “tax valley.” For example, if you’re recently retired but haven’t yet started collecting Social Security or required minimum distributions (RMDs), this window from your early 60s to 70s could be a golden opportunity to convert portions of your traditional retirement savings into a Roth.


By strategically moving money over a few years, you can fill up the lower tax brackets and reduce your future RMDs, which might otherwise push you into a higher bracket later. This can also help reduce the tax burden on your Social Security benefits once you begin collecting them.


3. You Have a Long Time Horizon 

Younger investors in their 30s and 40s may benefit from a Roth conversion if they have decades for that money to grow tax-free. 


For example, $100,000 converted to a Roth at age 35 could potentially grow to over $1 million by retirement age — all of which could be withdrawn tax-free. That same conversion done at age 60 might only have time to grow to $140,000-$150,000 before withdrawals begin.


4. You Want to Leave a Tax-Free Legacy

Roth IRAs are powerful estate planning tools. Your spouse can treat an inherited Roth IRA as their own, allowing the assets to continue growing tax-free without requiring distributions during their lifetime, creating the potential for decades of additional tax-free growth.


Kids or grandkids who inherit a Roth IRA will also enjoy a tax-free inheritance, at least for a time. In contrast, inheriting a traditional IRA means your beneficiaries would pay taxes on every dollar they withdraw — potentially during their peak earning years when they’re in a higher tax bracket.


When Roth Conversions Don’t Make Sense


Of course, just because you can convert doesn’t mean you should. Here are a few situations when a Roth conversion strategy might not work in your favor:


1. You’re Currently in a High Tax Bracket

If you’re currently in your peak earning years and already paying taxes in the 35% or 37% federal tax brackets, converting could mean handing over a substantial portion of your retirement savings to the IRS.


For example, a $100,000 conversion for someone in the 35% federal tax bracket could trigger an additional tax bill of $35,000 or more. If you expect to be in a lower bracket during retirement — say 22% or 24% — waiting to pay taxes then might be more advantageous.


2. You Don’t Have Cash to Pay the Taxes

The most efficient Roth conversion strategy requires having cash outside your retirement accounts to pay the resulting tax bill. Here’s why this matters:


If you have to withdraw extra money from your traditional IRA to cover the taxes on the conversion, you’re reducing your future growth potential. For instance, if you want to convert $50,000 and are in the 24% tax bracket, you may need an additional $12,000 for taxes. If you take that $12,000 from your IRA too, you’d pay taxes on that withdrawal as well, creating a compounding tax problem. 


Even worse, if you’re under age 59½, you could face a 10% early withdrawal penalty on any funds used to pay the taxes, further reducing the effectiveness of your conversion. 


3. You’ll Need the Money Soon

In general, Roth IRAs have a five-year rule that states you must wait five years from the beginning of the tax year of your first contribution to make a withdrawal of the earnings. (You can withdraw contributions, not earnings, tax-free and penalty-free at any time.)


For Roth conversions, however, a new five-year rule starts separately for each conversion. While there are exemptions to this penalty, such as disability and turning age 59½, it’s worth considering if you plan to use the converted funds in the near future.         


Enter: The Roth Conversion Ladder


One strategy we often recommend to clients who want to implement a Roth conversion is the Roth conversion ladder. This approach helps work around the five-year rule while building a tax-efficient income stream, especially for those planning an early retirement. 


Here’s how it works:


Year 1: You convert a portion of your traditional IRA to a Roth (let’s say $30,000).

Year 2: You convert another $30,000.

Year 3: You convert another $30,000.

Year 4: You convert another $30,000.

Year 5: You guessed it — you convert another $30,000.

Year 6: Now the Year 1 conversion is available for withdrawal without penalties.

Each following year: A new “rung” of the ladder becomes accessible while you continue adding new conversions at the top.


Over time, you build a steady stream of tax-free income in retirement that you can predictably access. This strategy is particularly valuable for early retirees who need income before the traditional retirement age or for anyone looking to minimize RMDs down the road.


For example, a couple retiring at 55 might build a conversion ladder to provide $30,000 of annual tax-free income starting at age 60, giving them a bridge until they begin taking Social Security benefits at age 67. Meanwhile, they can use other savings for the first five years of retirement while the initial conversions “season.”


The ladder approach also allows you greater flexibility to manage your tax bracket each year by controlling exactly how much you convert, rather than converting a large sum all at once and potentially pushing yourself into a higher tax bracket.


Making Your Roth Conversion Decision


As you’ve seen, Roth conversions are far from a one-size-fits-all strategy. The right approach depends on your unique financial situation, current and future tax bracket, retirement timeline, and long-term goals.


When considering a Roth conversion, remember that it’s not just about the math. Many of our clients initially hesitate at the thought of writing a big check to the IRS today, even when they know the long-term benefits. That emotional response is completely normal.


This is where thoughtful financial planning comes in. At Five Pine Wealth Management, we help you look beyond the immediate tax bill to see how today’s decisions impact your retirement income, Social Security strategy, and even your legacy plans. Sometimes, what feels uncomfortable at the moment creates the greatest long-term benefit for you and your family.


So, should you do a Roth conversion? The answer depends on:



  • Your current and projected future tax brackets
  • Whether you’re above income limits for direct Roth contributions
  • Your retirement timeline
  • Whether you have cash available to pay the conversion taxes
  • Your estate and legacy goals
  • Your comfort with paying taxes now versus later


A Roth conversion can be either a powerful wealth-building tool or an unnecessary tax expense. The difference comes down to proper planning and timing.


The Next Step


If you’re wondering whether a Roth conversion makes sense for your situation, let’s talk. Our fiduciary advisors will help you evaluate your options and develop a conversion strategy that aligns with your comprehensive financial plan.


We’ll walk through different scenarios, look at the numbers together, and help you feel confident in your decision  — whether that means converting, waiting, or taking a gradual approach with a conversion ladder.


Ready to explore whether a Roth conversion is right for you? Give us a call at 877.333.1015 or send us an email at info@fivepinewealth.com to schedule a conversation.

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When Saving Money Starts Getting in the Way of Living

May 21, 2026
Key Takeaways Saving money is important, but constantly postponing meaningful experiences can leave you financially secure and personally unfulfilled. Fear, habit, and identity often play a bigger role in spending decisions than numbers do. A healthy financial plan should support both your future security and your ability to enjoy life along the way. Imagine you’ve saved diligently for decades. You have a healthy income, growing retirement accounts, manageable debt, and investment balances that continue climbing year after year. Yet, somewhere in the back of your mind, a voice keeps saying, “Not enough.” So you hold off on the vacation or skip the kitchen renovation. You tell yourself you will spend more freely later, once things feel more certain. You keep asking yourself the same question, “Can we really afford this?” Sometimes the answer is yes by every objective financial measure, but emotionally, it still feels uncomfortable. For years, personal finance advice has focused heavily on the dangers of overspending. Save more. Spend less. Delay gratification. Avoid lifestyle creep. That advice absolutely matters. Many people would benefit from stronger saving habits. But there is another side of the equation that does not get discussed enough. Some people become so good at saving that they forget what the money was for in the first place. Am I Saving Too Much?  This question sounds almost absurd, and many people feel uncomfortable asking it. In our culture, saving is viewed as responsible and disciplined. Spending often gets framed as careless or indulgent. So when someone continues accumulating wealth year after year, nobody really raises concerns. But over-saving can create its own problems. We have worked with people who consistently save large percentages of their income while postponing almost everything meaningful to them. They delay vacations. Put hobbies on hold. Continue working in stressful jobs long after they financially need to. They keep waiting for some future point where they will finally feel safe enough to enjoy what they built. The challenge is that “enough” can become a moving target. As portfolios grow, lifestyles usually grow too. Concerns about inflation, healthcare costs, market volatility, taxes, and longevity all start competing for attention. Even financially successful people can develop a persistent fear that one wrong decision could jeopardize everything. That fear is often emotional rather than mathematical. In many cases, the numbers support far more flexibility than the person believes. The Psychology of Saving Money Saving behavior is deeply tied to emotion, identity, and the stories we tell ourselves about security. Understanding why you save the way you do is the first step toward making more intentional choices. Fear of running out is one of the most powerful drivers. Even people with substantial assets can feel that their wealth is fragile, particularly if they grew up without financial stability or lived through a major market downturn. The brain tends to overweigh dramatic losses compared to equivalent gains, which means the emotional pain of imagining a depleted account is often disproportionate to the actual probability of it happening. Habit reinforcement plays a significant role as well. If you spent 30 years in accumulation mode, consistently saving and reinvesting and growing, your financial behaviors became deeply ingrained. Transitioning from saving to spending, even intentionally, and when the numbers support it, can feel wrong at a gut level. The habits that built your wealth can work against you when the time comes to use it. Societal pressure adds another layer. High-earning professionals are often surrounded by messages that equate financial discipline with virtue. Spending on yourself can feel indulgent or even irresponsible, even when it’s neither. There is a difference between careless spending and deliberate investment in your own well-being, but the cultural script often blurs that line. For business owners and dual-income households, there is also the identity piece. When so much of your sense of self is tied to building, growing, and accumulating, shifting toward enjoyment requires a genuine psychological reorientation, not just a new budget line. Values-Based Spending Over-saving isn't fixed by spending more randomly. What actually helps is spending with intention — putting money toward things that genuinely matter to you. This is what we mean by values-based spending : aligning how money flows with what you care about. The exercise starts with a conversation about what you want your life to look like. Not the life you think you should want, and not the life your parents had or your colleagues' project, but the experiences, relationships, contributions, and comforts that would make your days feel meaningful and full. From there, a good financial plan becomes a permission structure. When your advisor can show you, concretely, that your goals are funded and your risks are managed, spending stops feeling like a threat to your security. It starts feeling like money doing what money is supposed to do. Values-based spending also helps you stop spending on things that don’t matter to you. Many high earners discover that their default expenditures have drifted away from their priorities over time. Redirecting those dollars toward what genuinely matters often feels better than a raw increase in spending. Signs You May Be Under-Living Financially A few patterns tend to show up repeatedly among chronic oversavers: You feel guilty spending money even after careful planning. Your savings goals continue increasing without a clear reason. You postpone experiences you deeply want because you “might” need the money someday. You struggle to define what financial freedom would look like for you. Your net worth keeps growing, but your day-to-day life feels largely unchanged. You continue working at a pace that negatively impacts your health or relationships, despite already being financially secure. None of these automatically means you are saving too much. But they are often signals worth examining more closely. Practical Steps to Align Your Money With Your Life Making the shift from over-saving to purposeful living does not require a dramatic overhaul. It starts with a few honest conversations and a willingness to examine some long-held assumptions. Start by revisiting your retirement projections with a financial advisor. Ask specifically what your models say about your ability to spend, not just your ability to accumulate. Many clients are surprised to find that their plan supports significantly more lifestyle spending than they had assumed. Build a "permission budget" for discretionary spending. This is not a ceiling on enjoyment but a deliberate allocation toward experiences and priorities you have identified as meaningful. Giving yourself explicit permission to spend in certain areas, backed by a sound financial plan, reduces the guilt that often accompanies even well-deserved expenditures. Consider what you are waiting for. If the answer is a number that keeps moving, or a level of certainty that financial markets will never provide, it’s worth exploring whether the hesitation is financial or psychological. A good advisor can help you separate the two. A Healthy Financial Plan Should Support Your Life A strong financial plan should create confidence, not permanent deprivation. Saving diligently is important, but there is also value in recognizing when enough may already be enough. The goal is for your spending to reflect your values, your priorities, and where you are in life right now. Because eventually, there has to be a point where the money begins serving you instead of the other way around. If you’ve been wondering whether your saving habits still align with the life you want to live, we’d love to help you think through it. At Five Pine Wealth Management , we help clients build financial plans that support both long-term security and meaningful living today. Call us at 877.333.1015 or email us at info@fivepinewealth.com to start the conversation. Frequently Asked Questions (FAQs) Q: Why do I feel anxious spending money even when I can afford it? A: Spending anxiety is often tied to the psychology of saving money. Past financial stress, market downturns, family experiences, and years of disciplined saving can condition people to associate spending with risk, even when their financial plan supports it. Q: Can over-saving negatively affect your quality of life? A: Yes. Constantly delaying travel, hobbies, family experiences, or personal goals in pursuit of “more” can lead to burnout, stress, and missed opportunities. Financial security matters, but so does enjoying the life your money was meant to support.

What's Inside Your 457? (And Why It Matters More Than You Think)

April 30, 2026
Key Takeaways Your 457 should work alongside your pension to support your overall retirement income plan. Many 457 plans are set on autopilot, but your investments shouldn’t stay that way as you near retirement. Understanding what you're invested in helps you make better decisions when markets move. Turning 50 is your signal to review your 457 more closely so you can check your contributions, risk level, and how it fits with your pension before retirement gets too close. Like many first responders in Washington and Idaho, you probably have a pretty solid grasp of your "Plan A." Between the WA LEOFF Plan 2 or ID PERSI, you’ve spent your career earning a guaranteed monthly pension. It’s the foundation of your retirement — the steady paycheck that arrives regardless of what the stock market does. But then there’s that "other" account. The one you’ve been tucking money into every pay period through deferred compensation. In Washington, it’s usually the Washington State Deferred Compensation Program (WSDCP); in Idaho, it’s often the State of Idaho 457(b) Plan. When we sit down with firefighters and police officers who are within 10 years of their "end of watch" date, they usually know two things about this account: how much is in it and that they’re glad they started it. But when we ask, 'What is that money actually doing?' — that question usually gets a pause. If you’re 50 or older, it’s time to move past the "set it and forget it" mentality. Let’s take a look at how your 457 works and how to make sure it’s working for you. 457 Plan Investment Options  Unlike your pension, which is managed by the state, your 457 is a “defined contribution” plan. That means the outcome depends entirely on how much you put in and how those funds are invested. A 457 plan is just a container. Think of it like a toolbox. What matters is what’s inside the box. Your account isn’t sitting in cash (at least it shouldn’t be). It’s invested in a mix of underlying funds, usually including: Stock funds (equities): These are your growth engines. They tend to go up over time, but they can be volatile. These could be U.S. stock funds or international funds. Bond funds (fixed income): These provide stability and income, but with historically reduced long-term returns. Stable value or cash equivalents: Lower risk, but also lower growth. Most public service 457 plans in the Northwest offer a menu of these options. Some people choose to build their own mix, while others choose a single “all-in-one” fund and let it do the work. This brings us to the most common choice we see… What is a Target-Date Fund? A Target-Date Fund (TDF) is designed to be a one-stop shop. The “date” in the name is the year the fund assumes you will retire. If you plan to hang up the uniform in 2030, you’d likely be in a 2030 fund. A TDF automatically shifts its risk level as you get closer to that date. This is called the glide path . When you are 20 years away from retirement, the fund is aggressive. It buys mostly stocks because you have time to recover from market crashes. As you get closer to the target year, the fund manager automatically “glides” the investments away from risky stocks and into “safer” bonds and cash. TDFs are built for the “average” American worker who relies solely on Social Security and a 401(k), but you aren’t the average worker. You have a LEOFF or PERSI pension. Because your pension acts like a “super bond” (stable, guaranteed income), being too conservative in your 457 might hinder your growth. Conversely, if you’re planning to retire at 53 (common for LEOFF 2) but your fund is target age 65, you might be taking way more risk than you realize. It’s also important to note that two funds with the same year, for example, 2035, can have very different levels of risk depending on the provider. One may still hold 60% in stocks near retirement, while another might be closer to 40%. How Risk Changes as Retirement Approaches In your 20s, 30s, and even early 40s, “risk” is your friend. Risk is what grows a $50,000 account into a $500,000 account. However, as you approach the age of 50, the definition of risk changes. That’s because you’re entering what we call the “retirement red zone,” roughly five years before and five years after your retirement date. This is when: Your portfolio is at its largest You have less time to recover from downturns You may soon rely on the money for income We look at two specific types of risk for our clients: Sequence of Returns Risk: The risk that a market crash occurs just as you start taking withdrawals. If the market drops 20% the year you retire, and you start pulling money out to travel or pay off the mortgage, your account may never recover. Inflation Risk: If you get scared and move everything into the “Fixed Account” or “Stable Value Fund,” you might not lose money, but you’ll lose purchasing power. If your account earns 2% but the cost of living goes up by 4%, you’re technically getting poorer every year. Finding the “Goldilocks” zone — not too hot, not too cold — is the primary job of a pre-retiree. The Age 50 Checklist Once you’re in your 50s, it’s time to stop running on autopilot and take a closer look at your 457. Check Your “Catch-Up” Options In 2026, the standard 457 contribution limit is $24,500; however, once you’re 50, you can add an extra $8,000 in “Age 50 Catch Up” contributions. Even better, if you're within three years of your normal retirement age and haven’t maxed out your contributions in previous years, you may be able to contribute up to double the normal limit ($49,000). This is a massive boost for your savings. Diversify Your Tax Buckets Most first responders have their money in a Traditional 457, meaning you get a tax break now but pay taxes when you take the money out. Both Washington and Idaho offer Roth 457 options. With a Roth, you pay the tax today, but the money grows and comes out tax-free. For high-earners who expect their pension to keep them in a higher tax bracket during retirement, having a “tax-free” bucket of money can be helpful. Coordinate With Your Pension If your LEOFF or PERSI pension covers 70% of your needed income, your 457 can afford to be a bit more aggressive in fighting inflation. If you plan to use your 457 to bridge the gap until you collect Social Security, that money needs to be protected differently. Let’s Take a Look Together At Five Pine Wealth Management, we work with first responders in Washington and Idaho who are approaching retirement and want clarity around their financial picture. We understand how LEOFF Plan 2 and PERSI fit into the bigger picture, and how your 457 can support the retirement you’ve worked hard to build. If you’d like help understanding what you’re invested in, we’d be happy to take a look with you. You can email or call us at 877.333.1015 to schedule. We’d welcome the conversation. You’ve spent your career looking out for the community; let us help you look out for your future. Frequently Asked Questions (FAQs) Q: Is a Target-Date Fund enough for my 457 plan? A: For many people, it is, but as you get closer to retirement, it’s important to review whether the fund’s risk level matches your timeline and overall financial picture. Q: Is there a penalty for taking money out before age 59½? A: No. Unlike a 401(k), the 457 plan has no 10% early withdrawal penalty if you leave your employer, making it an ideal tool for first responders retiring in their early 50s. Q: Should I choose a Target-Date Fund or build my own portfolio in a 457? A: Target-date funds offer simplicity, but building your own portfolio allows for more customization. If you have a pension that already provides a stable income, building your own could be a good option.