Financial experts advise against waiting too long to convert to a Roth IRA at year-end.

• During the second quarter of 2024, Fidelity reported a 46% year-over-year increase in Roth individual retirement account conversions, with more investors making the switch.
• Roth conversions at the end of the year are preferred by many advisors due to their ease in forecasting tax implications.
• Experts advise investors to act quickly if they want to make a Roth conversion for 2024.

Experts advise that waiting too long to decide on a year-end Roth individual retirement account conversion could be risky.

Converting Roth IRA funds from pretax or nondeductible accounts results in tax-free growth, but requires paying upfront taxes on the converted balance, thereby increasing adjusted gross income.

During the second quarter of 2024, Fidelity reported a 46% year-over-year increase in the popularity of the strategy.

Despite a decrease in inflation, the middle class continues to experience financial strain.

Experts advise that Roth conversion timing is crucial for those who want to complete the transaction by 2024.

Some investors are considering paying Roth conversion taxes now, even though the current tax rates are set to expire in 2025, in order to take advantage of lower tax brackets.

Uncertain control of the White House, Senate, and House of Representatives makes it challenging to predict future tax law changes.

Why Roth conversions happen at year-end

Certified financial planner Ashton Lawrence, a director at Mariner Wealth Advisors in Greenville, South Carolina, states that year-end is a popular time for Roth conversions because it's easier to predict the tax consequences.

He stated that you now have a clearer understanding of your income sources for the year, including bonuses, mutual fund distributions, and partnership earnings.

Lawrence warned that Roth conversions can increase adjusted gross income, which may result in higher Medicare Part B and Part D premiums for retirees.

Don't wait too long for Roth conversions

Experts advise that while tax projections are crucial, it's not wise to delay a year-end Roth conversion if you're considering it.

If you wait until December, your financial institution could be overwhelmed, advised CFP and enrolled agent Tricia Rosen, founder of Access Financial Planning in Newburyport, Massachusetts.

These companies frequently have to manage other year-end activities, including qualified charitable distributions, tax-loss harvesting, and more.

She usually starts the process with clients early to determine if a Roth conversion or partial Roth conversion is suitable.

"Although I'm more conservative, I want to complete it by mid-November."

Lawrence typically completes Roth conversions in December, but he also starts the process earlier. The timeline can be shorter than investors expect, especially during the holidays, he said. "Now is a good time to start having that conversation," Lawrence said.