According to advisors, the optimal tax bracket for a Roth IRA conversion is.

• Whether a Roth individual retirement account conversion is suitable for you depends on your tax bracket.
• To determine the time it will take to break even on upfront taxes, you must first consider your long-term goals before completing the transfer.
• Experts advise weighing other financial planning opportunities in lower-income years.

Whether a Roth individual retirement account conversion is suitable for you depends on your tax bracket.

Roth IRA conversions allow for the transfer of pretax or nondeductible IRA funds to a Roth IRA, resulting in tax-free growth. However, this comes with the cost of paying upfront taxes on the converted balance, which must be covered through a planned expense.

During a stock market downturn, a popular strategy is to convert the balance into a tax-free form, which triggers a smaller tax bill. Additionally, investors can experience more tax-free growth when the market recovers.

The conversion of a Roth IRA comes with a tax bill, and you will owe regular income taxes on the converted balance, depending on your tax bracket.

Experts advise considering the time it will take to break even on upfront taxes in relation to your long-term goals.

The best tax brackets for Roth conversions

Consider the impact of a Roth conversion on your current tax bracket when crunching the numbers, advises Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

If you can stay within the 12% tax bracket or lower, it's a no-brainer, 99% of the time, but anything above the 12% is situational, depending on a client's goals and other factors.

Ryan Losi, a certified public accountant and executive vice president of CPA firm Piascik, employs a "rule of thumb" to approve Roth conversions.

If we remain in the 24% bracket or below, I'm in favor. However, if we move into the 32% bracket or higher, the "recovery period" to recover upfront taxes will be extended.

Experts suggest that benchmarks for estate planning can vary based on a client's specific objectives.

Weigh rebalancing in lower-income years

Advisors usually strive to allocate income within a specific tax bracket during a Roth conversion, while avoiding crossing into the next bracket.

Focusing solely on Roth conversions could limit other planning opportunities, Lucas pointed out.

You could leverage your lower tax brackets to rebalance your portfolio, he said.

Tax gain harvesting is a strategy that involves selling profitable assets during lower-income years.

In 2024, you may be eligible for the 0% long-term capital gains rate if your taxable income is up to $47,025 as a single filer or $94,050 as a married couple filing jointly.

These figures would include assets sold from your brokerage account.