Congress is back at it, aiming to change the tax laws again. Just since 2017, there has been the Tax Cuts and Jobs Act (TCJA), the SECURE Act and the CARES Act, each of which contained tax provisions, some very significant. And as we speak, Congress and the White House are horse trading on another round of changes.

Because new legislation is still being negotiated, I think it’s too soon to change your financial plan. But there is one strategy that makes sense for a lot of people, and it may make even more sense if certain proposals make it into law. That strategy is a Roth conversion. If you’re not familiar with the idea, I described it in a previous article.

The primary benefit of Roth conversions is to take advantage of tax rate “arbitrage.” For example, if you could pay a tax of just 24% today to convert a pre-tax IRA into a Roth IRA, you would happily do that if you expected your tax rate to be much higher—say 32% or 35%—down the road.

As I noted in my earlier article, though, it takes some amount of forecasting to guess your future tax rate. First you need to estimate your future income. Then you need to guess what Congress will do with the tax rates themselves. As we’ve seen in recent years, political winds can shift back and forth frequently, making this a difficult guessing game.

Because of that frustrating reality, I’m not a fan of forecasting. But there are two reasons to believe tax rates will indeed be higher in the future:

• The 2017 TCJA included a sunset provision, meaning that rates are set to rise automatically in the future. In 2026, the rates will revert to 2017 levels. So at the very least, if Congress doesn’t act, rates will climb in less than five years.
• Right now, Congress is debating potential increases that might take effect even sooner.

For those reasons, Roth conversions are looking more appealing right now. If you happen to be retired, or have a low income this year for other reasons, this could be an ideal time to complete a conversion, while rates remain at current levels. To be sure, there’s always the possibility that Congress could make a tax increase retroactive to January 1, 2021. But the further we progress into the year, the less likely that seems.

That tax rate arbitrage is the most well understood benefit of Roth conversions, but there are four additional benefits that often go overlooked.

Medicare premiums: For most people, Medicare premiums are very reasonable. But these premiums do vary based on income. Specifically, the costs for Part B and Part D both scale up in relation to income. For example, a single individual with income under $88,000 would pay just $1,782 per year for Part B coverage. But with income between $165,000 and 500,000, the cost for Part B would more than triple, to $5,702 per year. Part D would also increase, by almost $1,000.

These are called Income Related Monthly Adjustment Amount (IRMAA) surcharges, and they are effectively another tax in retirement. Thus, if you can reduce your income in retirement, you can reduce these surcharges. How can you reduce your income? Roth conversions are particularly effective. That’s because every dollar that comes out of a pre-tax IRA is taxable. So when required minimum distributions begin at 72, the size of your pre-tax IRA will impact the level of your income. But if you convert some of your pre-tax IRA to a Roth, these taxable distributions will be smaller. If you can shrink your pre-tax IRA enough, you can bump down those costly IRMAA surcharges—and this is a benefit that can last throughout retirement.

Estate tax: Today, the Federal estate tax exclusion—the amount you can leave heirs without paying any estate tax—is nearly $12 million per person, or more than $23 million for a married couple. For that reason, it’s not an issue for most people. But starting in 2026, those limits will get cut in half, to about $6 million and $12 million. These still might seem like big numbers, but there are a few wrinkles to keep in mind.

The first is that the estate tax is a political football. That exclusion number has changed many times in the past, and it’s likely to continue changing in the future. It’s definitely on the table for discussion right now. In addition, many states impose their own estate tax, often with much lower exclusions. In Massachusetts, for example, the estate tax kicks in at just $1 million of assets. So don’t let that headline $23 million figure lull you into complacency. The estate tax should always be on your radar.

How can Roth conversions help with the estate tax? Here’s an example: Suppose you have $15 million in assets, including $3 million in pre-tax IRAs. If you were to die in ten years, after the exclusion had reverted to the $12 million level for a married couple, then $3 million of your estate would be subject to tax. Now suppose you complete a Roth conversion this year. If you converted your entire $3 million IRA, you’d pay about $1 million in Federal taxes, plus state tax, depending on where you live. After paying that tax, your estate would now be $1 million smaller—$14 million instead of $15 million. The result: Because the estate tax rate is a flat 40%, the bill would be about $400,000 smaller.

Importantly, this wouldn’t shortchange your heirs in any way. That’s because you’d just be paying a tax now that they would have paid later. In fact, I think this strategy would actually help your heirs, as described next.

Taxes on inherited IRAs: Another recent rule change was the elimination of the “stretch IRA.” In the past, when children inherited an IRA, they had decades over which to withdraw the funds. The ability to stretch those distributions out over many years meant that the tax impact each year was modest. But under the new rules, heirs must withdraw the entire account within the first ten years after the account owner dies. The result is a potentially large amount of additional taxable income for children inheriting IRAs.

But if instead you completed a Roth conversion during your lifetime, you would effectively be paying taxes on your children’s behalf, and potentially at much lower rates. Why would the rate be lower? If you think about the normal cycle of life, parents tend to die when their children are in their peak earning years. So if you complete a Roth conversion when you are retired and at a relatively low income level, you’ll likely save your children from paying higher rates down the road.

Will this benefit your family? It depends on the size of your IRAs, how many children you have, their ages, and their careers. But in certain circumstances it could make an enormous difference.

Peace of mind: I often say that there are two answers to every financial question: The first is what the math says. The second is how you feel about it. When it comes to Roth conversions, it’s definitely important to work through the numbers. Especially if Congress agrees on rate increases this year, that will tip the scales further in favor of conversions. But ultimately, we are still in the land of predictions.

You can never be sure how things will work out without the benefit of hindsight. Tax rates, longevity and market growth all remain unknowns. But that uncertainty ends up being a point in favor of Roth conversions. Once you’ve paid the tax to move funds into a Roth IRA, you can be virtually certain it will never be taxed again. That is sure to provide you with a benefit that is non-quantifiable but highly valuable: peace of mind.