Slott's Roth screen makes conversion a standing call

Ed Slott's IRAHelp published a Roth conversion guide on August 31 that deserves a place in every advisor's intake materials, opening with the reminder that converting a traditional IRA is a choice and no single answer fits every owner. The guide—titled Part 1 and covering workplace-plan conversions as well—lays out six categories of owners for whom the move could make sense, and together they form a triage protocol rather than a one-time checklist. The linchpin is the fifth category, outside cash to pay the tax, because without it every other reason produces a smaller, penalized Roth.

The first category is the client who will not need the money soon or at all, especially when the funds are meant for beneficiaries—most of whom face the 10-year rule on inherited IRAs, which compresses the payout and the tax bill into a short window. Converting to a Roth pays the tax at the owner's current rate and leaves heirs an account with no future income tax, a decision Slott frames as one made for people who outlive the owner rather than for the owner's own cash flow.

The second category is anyone naming a trust as the IRA or plan beneficiary, because a trust that retains inherited traditional IRA funds hits the 37% bracket once its income exceeds $16,000 for 2026. Converting while the owner is alive eliminates that trust-level tax problem after death, since Roth dollars are not subject to income tax at distribution—and the administrative lesson is to check the beneficiary form on a schedule, not just when an estate attorney asks.

The third category—clients who expect future tax rates to be higher, with the national debt above $40 trillion as Slott's supporting evidence—is the one criterion that is a pure bet, and advisors should present it as such. The conversion is a rate arbitrage between the client's bracket today and the bracket that will apply at distribution, which forces a client to take a view: only the dollars that would be taxed at a higher rate later are worth converting now.

The fourth category is clients with tax characteristics—high deductions, credits, and other benefits—that can absorb conversion income, though Slott adds a caution for the meeting notes: capital losses offset at most $3,000 of conversion income in a year, so a large loss carryforward is a slow helper rather than a pass to a six-figure conversion.

The fifth category is where the decision gets made: the client needs non-IRA money to pay the conversion tax. Withholding the tax from the IRA itself reduces the amount that ends up in the Roth, and for anyone under 59½ the withheld dollars carry a 10% early-distribution penalty because they never get converted. An advisor who recommends a conversion before checking outside liquidity is recommending a smaller, taxed, potentially penalized version of the intended move.

The sixth category is young people, who generally sit in lower brackets and have not yet accumulated large retirement balances, so the conversion tax hit is modest and their horizon is the longest—giving Roth dollars decades of tax-free compounding. The guide does not use the term, but the logic points to a multi-year conversion ladder: fill the current bracket, then renew that bracket space in later years.

The reverse side of the screen matters as much as the six categories: a client who will need the IRA for living expenses, a client with no separate cash to pay the tax, and a client who expects lower rates in retirement are all better served by not converting. The guide's opening caution is the no-screen, and the six categories are the yes-screen.

Read as a management tool, Slott's list is exactly the kind this publication has argued matters, since tax leakage is the last uncommoditized edge in mass-affluent wealth. The categories run in a natural meeting order—heirs, trusts, rate expectations, tax attributes, outside cash, age—and each produces a different instruction: the trust client needs a beneficiary-form review, the young client needs a compounding illustration, and the cash-poor client needs a plan before a conversion.

The ordering is the guide's real discipline, because a conversion driven by rate arbitrage alone and funded through withholding produces less money in the Roth, a possible penalty, and no cleaner inheritance. Slott makes outside cash a precondition rather than a footnote, which means the harder conversation—can you pay the tax from outside the IRA?—has to come first, before the client asks why the Roth balance came up small.

The title promises the mechanics later, and that will be the easy half; the screen is the hard half. Run it at the annual review, with the beneficiary form in one hand and the outside cash balance in the other, and the conversion stops being a year-end guess. The landmarks are concrete: $16,000 of trust income, $3,000 of capital-loss offset, and the 10% penalty on withheld taxes before 59½.