Roth Conversions: The “Gap-Year Window” Most High Earners Miss

By Michelle Cho, CFP®, BFA™, ChSNC® | Founder, Echo Wealth Partners 

Last year, I sat down with a woman, let’s call her Mina.

She was a senior leader—smart, capable, used to making big decisions under pressure. But life happened: her mom’s health declined, and Mina took a gap year to be present and help manage care.

For the first time in decades, Mina’s income dropped dramatically.

She wasn’t earning a paycheck. She was living off savings to cover her lifestyle. And like many high-achieving women, she had done “all the right things” over the years—maxed retirement accounts, invested consistently, built a real nest egg.

She also had $2 million Traditional IRA that she rolled over from previous jobs.

And in that gap year when her tax bracket was unusually low, we had an opportunity that could meaningfully reduce her lifetime tax bill by converting a part of her Traditional IRA to a Roth IRA, intentionally, bracket-by-bracket.

Not all of it. Not impulsively. Not because “Roth is always better.” 

But because in that year, the math (and her life) created a rare window where converting could be unusually efficient.

The big idea

A Roth conversion is essentially a tax-rate trade.  You pay taxes on IRA dollars now (at today’s tax rates), so you can potentially take that money out later tax-free (and reduce future taxable income).

For Mina, the question wasn’t “Should I do a Roth conversion?”  It was “How much can we convert this year without pushing her into a tax bracket she’ll regret?”

That’s the difference between a smart Roth strategy and an expensive one.

What a Roth Conversion Actually Is (Mechanics, Plain English)

A Roth conversion moves money from Traditional IRA (pre-tax) to Roth IRA (after-tax) account.

When you convert, the converted amount is added to your taxable income for that year and you pay ordinary income tax on that amount (federal, and possibly state).  After conversion, the money grows in the Roth, and qualified withdrawals can be tax-free.

What it’s not:

• It’s not a withdrawal you spend.

• It’s not a loophole.

• It’s not automatically a good idea for everyone.

It’s simply choosing to recognize income on your terms, in a year where your tax rate is favorable.

Why “Low-Income Years” Can Be Roth Conversion Gold

Most of my clients are high earners. They’re used to living in higher tax brackets, especially during peak career years.

But there are years when income dips:

• gap year / sabbatical

• job transition or layoff

• early retirement before Social Security starts

• business down year

• one spouse stops working

• large itemized deductions (big charitable year, medical expenses, etc.)

These years can create unused space in lower tax brackets.  And if you do nothing, that space disappears forever.  A Roth conversion is one way to “fill the bracket” with IRA dollars intentionally.

Tax Brackets: The Lever We’re Pulling

The U.S. tax system is progressive. That means you don’t pay one tax rate on all your income.  You pay different rates on different layers as seen in the below 2025 tax table:

Think of tax brackets like buckets:

• Your first dollars fill the lower bucket,

• then the next bucket,

• and so on.

A Roth conversion pours additional “income” into those buckets.

So the strategy becomes:

“How much can we convert before we spill into the next bucket?”

That’s why conversions are often done:

• gradually

• over multiple years

• with a specific bracket target (for example, “convert up to the top of the 24% bracket,” or “stay within 22% this year.”)

For Mina, we modeled a conversion amount that used her low-income year efficiently without accidentally creating a tax surprise.

The Step-by-Step (How a Roth Conversion is Done)

Here’s how the process typically works:

1. Open a Roth IRA (if you don’t already have one) This can be at the same custodian as your IRA.

2. Choose the amount to convert This is the planning step—where tax brackets matter most.

3. Execute the conversion Custodian transfers from Traditional IRA to Roth IRA This can often be done online or with a simple form No 60-day rollover drama if it’s a direct conversion

4. Plan for taxes The converted amount is reported on a 1099-R The Roth receives it and reports on Form 5498 You pay tax with withholding and/or estimated payments

A key best practice:

If you can, avoid withholding taxes from the IRA itself (especially if you’re under 59½), because withholding can be treated like a distribution. Many people instead pay taxes from a separate taxable account.

(Your CPA and planner should coordinate this—because “how” you pay the taxes can matter.)

How We Keep the Tax Bill From Getting Out of Control

A Roth conversion can be brilliant—or blunt. Here are the levers we use to keep it smart:

1) Convert in “brackets,” not emotions

We decide in advance:

• What tax bracket are we targeting?

• What income is already on the return?

• How much bracket space is left?

2) Coordinate with the rest of your tax picture

Conversions can affect more than your marginal tax rate. They can also interact with:

• Medicare premium surcharges (IRMAA)

• taxation of Social Security

• capital gains rates

• deductions and credits

• state taxes (if applicable)

This is why conversions should rarely be decided in isolation.

3) Use multi-year planning (not one-year guessing)

Often, the best strategy isn’t one big conversion—it’s a conversion ladder:

• convert a planned amount each year

• keep taxes in a controlled range

• reduce future RMD pressure

• build tax-free “flexibility” in retirement

Why This Matters for High Achievers With Large IRAs

If you’ve accumulated significant pre-tax retirement assets, future taxes can quietly become your largest retirement expense.

Two common realities:

1. RMDs can force income later even if you don’t “need” the money.

2. A surviving spouse can end up in higher brackets sooner (single tax brackets compress).

A Roth conversion strategy can help create:

• Flexibility: More tax-free income later and funds available if her mother’s care needs increased.

• Control: She, not the government, now decides when and how she spends her wealth.

• A Gift: She is leaving her family a legacy of security, not a future tax bill.

It’s not only about “saving taxes.” It’s about buying freedom from future tax constraints.

The Real Lesson From Mina’s Gap Year

Mina didn’t do a Roth conversion because she read a headline.

She did it because her life created a rare tax window and we modeled it carefully.

If you’re in a lower-income year (or approaching one), you may have an opportunity that disappears quickly once income rises again.

A simple question to ask:

“Is this one of my lowest-tax years—and am I using it wisely?”

Closing Thoughts

If you have a meaningful Traditional IRA balance and your income is changing (gap year, transition, early retirement, sabbatical), a Roth conversion may be one of the highest-leverage planning moves available, but only if it’s done with bracket-level precision and coordinated with your full tax and retirement plan.

If you’d like help modeling a Roth conversion strategy—coordinated with taxes, retirement income, and your definition of “enough”—I’m happy to do a 20-minute Roth Conversion Clarity Call to see what’s possible and whether it’s worth implementing this year. 

Happy Planning,

Michelle

Friendly reminder: This newsletter is educational and not personalized tax or investment advice. Equity comp rules vary by plan and individual situation.  Coordinate with your CPA and financial planner before making decisions.