Why Do People Engage In Roth Conversions?

Lucas Goodman and Heidi R. Schramm

National Tax Journal, 2023, vol. 76, issue 3, 561 - 592

Abstract: We study Roth conversions using administrative tax data on all individuals who made Roth conversions from 2003 to 2018. We find that Roth conversions increased by more than 800 percent in 2010 when income limits were eliminated. We find that individuals (1) tend to convert when their tax rate is lower, (2) often convert only a portion of their individual retirement account (IRA), (3) use conversions to increase total tax-advantaged savings, and (4) are more likely to convert at ages shortly before distributions must be taken from IRAs but not Roth IRAs. We also find that behavioral factors may play a role in conversion decisions.

Date: 2023
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