Skip to content

This site uses cookies to store information on your computer. Some are essential to make our site work; others help us improve the user experience. By using the site, you consent to the placement of these cookies. Read our privacy policy to learn more.

Close
AICPA-CIMA
  • AICPA & CIMA:
  • Home
  • CPE & Learning
  • My Account
Journal of Accountancy
  • TECH & AI
    • All articles
    • Artificial Intelligence (AI)
    • Microsoft Excel
    • Information Security & Privacy

    Latest Stories

    • Incorporating prompt engineering into the accounting curriculum
    • Create a dynamic to-do list with Excel’s checkboxes
    • Another way to manage authentication texts
  • TAX
    • All articles
    • Corporations
    • Employee benefits
    • Individuals
    • IRS procedure

    Latest Stories

    • Paper tax refund checks on the way out as IRS shifts to electronic payments
    • IRS keeps per diem rates unchanged for business travel year starting Oct. 1
    • Details on IRS prop. regs. on tip income deduction
  • PRACTICE MANAGEMENT
    • All articles
    • Diversity, equity & inclusion
    • Human capital
    • Firm operations
    • Practice growth & client service

    Latest Stories

    • Paper tax refund checks on the way out as IRS shifts to electronic payments
    • Practice mobility update: New NASBA tool tracks changes for CPAs
    • IRS keeps per diem rates unchanged for business travel year starting Oct. 1
  • FINANCIAL REPORTING
    • All articles
    • FASB reporting
    • IFRS
    • Private company reporting
    • SEC compliance and reporting

    Latest Stories

    • SEC accepting Professional Accounting Fellow applications
    • SEC names new chief accountant
    • SEC ends legal defense of its climate rules
  • AUDIT
    • All articles
    • Attestation
    • Audit
    • Compilation and review
    • Peer review
    • Quality Management

    Latest Stories

    • AICPA unveils new QM resources to help firms meet Dec. 15 deadline
    • 8 steps to build your firm’s quality management system on time
    • Auditing Standards Board proposes a new fraud standard
  • MANAGEMENT ACCOUNTING
    • All articles
    • Business planning
    • Human resources
    • Risk management
    • Strategy

    Latest Stories

    • Business outlook brightens somewhat despite trade, inflation concerns
    • AICPA & CIMA Business Resilience Toolkit — levers for action
    • Economic pessimism grows, but CFOs have strategic responses
  • Home
  • News
  • Magazine
  • Podcast
  • Topics
Advertisement
  1. newsletter
  2. Cpa Insider
CPA INSIDER

Why Roth conversions still make sense after the SECURE Act

Despite the demise of the stretch period, Roth IRAs have advantages.

By Joseph H. Doerrer, CPA/PFS
June 8, 2020

Please note: This item is from our archives and was published in 2020. It is provided for historical reference. The content may be out of date and links may no longer function.

Related

June 1, 2020

Look before you leap into a 529 plan

May 27, 2020

When planning for a natural disaster, don’t forget about your finances

January 21, 2020

The financial and human cost of loneliness in retirement

TOPICS

  • Personal Financial Planning
    • Tax Planning
    • Retirement Planning

With the passing of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, in December 2019, some of the assumptions on which years of retirement planning was executed have been drastically altered. The elimination of the “stretch period” for most nonspouse beneficiaries, along with additional changes, added new wrinkles to the planning process that must be considered by every IRA owner and CPA financial planner. These changes not only altered the effects of past planning, but will also change assumptions around IRA planning for the future. In particular, they alter the decision-making process around whether to make Roth conversions.

How the SECURE Act will affect RMDs from inherited IRAs

Prior to the passage of the SECURE Act (Division O of P.L. 116-94), beneficiaries who inherited IRAs were eligible to “stretch” the period in which they had to take required minimum distributions (RMDs) from those accounts based on their own life expectancy. Many account owners who wanted to maximize assets left to heirs chose to take full advantage of this stretch by bequeathing IRAs to younger individuals to minimize RMD amounts taken by the beneficiary. This strategy allowed the opportunity for maximum growth of the plan assets across multiple generations. In this scenario, assets were able to grow within the plan tax-deferred over the decedent’s lifespan, with additional appreciation while beneficiaries held the plan over their own lifetime, as they were only required to draw minimally on the account via RMDs.

Before the SECURE Act was passed, many individuals who wanted to leave IRAs to heirs and did not require use of the account within their own lifetime also chose to convert their IRAs from traditional to Roth IRAs. While tax is incurred with the conversion, doing this removed the owner’s RMD requirement during their lifetime and secured tax-free distributions for their beneficiaries, thus potentially maximizing their bequest. Account owners executed the conversions expecting that a much longer stretch period would be in place for any future beneficiaries. This longer stretch period allowed for greater potential growth of the funds inside the account over the life of the beneficiaries, yielding a greater benefit from converting.

The SECURE Act, however, eliminated the stretch period and installed a new time period over which the account must be distributed. Now, most nonspouse beneficiaries of inherited IRAs and qualified plans must distribute the account balance within 10 years. In the case of traditional IRAs, these beneficiaries face additional income tax considerations, due to the fact that they will now be taking larger taxable distributions within a compressed time period. For individuals in their prime earning years, navigating how to best draw down the account within 10 years may be challenging, particularly for those with larger accounts.

When Roth conversions still make sense

While the so-called death of the stretch has certainly limited some benefits of a Roth conversion for purposes of bequeathing an IRA to an heir, this planning opportunity remains an effective strategy for many. Scenarios where it makes sense to consider a Roth conversion include instances where taxes on the conversion can be paid with funds outside the account and the account owner will not need to access the account within their own life, or where individuals can make piecemeal conversions over multiple lower income years to convert “cheaply,” taking advantage of lower marginal tax rates.

Another factor advisers should take into account when deciding whether a Roth conversion makes sense is simplifying future decision-making for beneficiaries.

In most cases, absent any past nondeductible contributions, distributions from inherited traditional IRA accounts will be fully taxable to beneficiaries. For large traditional IRAs, determining the most tax-efficient approach to draw down the account may prove challenging. This is especially true for beneficiaries in their prime earning years.

Advertisement

Roth IRA beneficiaries will inherit a much more straightforward tax planning situation than beneficiaries of traditional IRAs. While they will be still subject to the 10-year period limit, their distributions from the account will not be taxable. Most beneficiaries will likely leave the entire balance under the protection of the account for the 10-year period to achieve maximum growth with minimal income tax consequences.

What remains the same about Roth conversions

Though considerations around Roth IRA conversions have changed as a result of the SECURE Act, Roth IRAs still offer advantages to account owners and beneficiaries. Roth IRAs are tax advantaged, and owners of Roth IRAs aren’t required to take RMDs. This can prove helpful in retirement, as it allows a larger amount of assets to remain in the account. Not having to take RMDs can also help account owners avoid creating unwanted taxable income, giving them more flexibility in retirement. Beneficiaries will enjoy a simpler tax situation, versus beneficiaries of traditional IRAs, due to the tax-free nature of their distributions from the account.

Advisers with clients who made Roth conversions prior to the SECURE Act should also exercise care to ensure that any account beneficiaries named as part of the original conversion planning, such as any younger individuals, still make sense in terms of accomplishing planning goals. 

The SECURE Act drastically affected IRA planning. Topics such as tax planning for traditional IRA beneficiary distributions, as well as avoiding planning issues during Roth conversions, have been thrust to the forefront. It is imperative for you, the trusted adviser, to have a firm grasp on the new rules and proactively work with clients by helping them update their plans. 

— Joseph H. Doerrer, CPA/PFS, MST, is a New Jersey-based tax adviser specializing in serving high-net-worth individuals. He frequently writes and presents on various topics within the areas of tax and financial planning. To comment on this article or to suggest a topic for another article, contact Courtney Vien, a JofA senior editor, at Courtney.Vien@aicpa-cima.com.

Advertisement

latest news

September 24, 2025

Paper tax refund checks on the way out as IRS shifts to electronic payments

September 24, 2025

Practice mobility update: New NASBA tool tracks changes for CPAs

September 23, 2025

IRS keeps per diem rates unchanged for business travel year starting Oct. 1

September 22, 2025

Managing teams, managing time: The importance of setting expectations

September 19, 2025

Details on IRS prop. regs. on tip income deduction

Advertisement

Most Read

MAP Survey finds CPA firm starting pay on the rise
IRS finalizes regulations for Roth catch-up contributions under SECURE 2.0
NASBA, AICPA release proposed revisions to CPE standards
Congress passes act allowing tax relief when a state declares disaster
Treasury posts preliminary list of jobs eligible for no tax on tips
Advertisement

Podcast

September 25, 2025

Professional liability risks related to Form 1065, CPA firm acquisitions

September 18, 2025

‘We’re still the thinkers’ — a reminder for tax pros in the AI era

September 11, 2025

Strong storytelling helps speakers deliver ‘medicine’ without the aftertaste

Features

Calming nervous clients nearing retirement
Calming nervous clients nearing retirement

Calming nervous clients nearing retirement

7 retirement tips for small firm CPAs
7 retirement tips for small firm CPAs

7 retirement tips for small firm CPAs

Building a better CPA firm: Stepping up service offerings
Multi-colored plus signs

Building a better CPA firm: Stepping up service offerings

2025 tax software survey
Smiley, frowney, and neutral faces for Tax Software Survey.

2025 tax software survey

FROM THIS MONTH'S ISSUE

Flip out with the latest Tech Q&A

The September Technology Q&A column shows how to create dynamic to-do lists with Excel's checkboxes and also how to set up multifactor authentication texts that don't rely on phones. Flip through both items and view a video walkthrough in our digital format. 

From The Tax Adviser

August 30, 2025

2025 tax software survey

August 30, 2025

Are you doing all you can to keep the cash method for your clients?

July 31, 2025

Current developments in S corporations

July 31, 2025

Paid student-athletes: Tax implications for universities and donors

MAGAZINE

September 2025

September 2025

September 2025
August 2025

August 2025

August 2025
July 2025

July 2025

July 2025
June 2025

June 2025

June 2025
May 2025

May 2025

May 2025
April 2025

April 2025

April 2025
March 2025

March 2025

March 2025
February 2025

February 2025

February 2025
January 2025

January 2025

January 2025
December 2024

December 2024

December 2024
November 2024

November 2024

November 2024
October 2024

October 2024

October 2024
view all

View All

http://JofA_Default_Mag_cover_small_official_blue

PUSH NOTIFICATIONS

Coming soon: Learn about important news

CPA LETTER DAILY EMAIL

CPA Letter Logo

Subscribe to the daily CPA Letter

Stay on top of the biggest news affecting the profession every business day. Follow this link to your marketing preferences on aicpa-cima.com to subscribe. If you don't already have an aicpa-cima.com account, create one for free and then navigate to your marketing preferences.

Connect

  • X Logo JofA on X
  • facebook JofA on Facebook

HOME

  • News
  • Monthly issues
  • Podcast
  • A&A Focus
  • PFP Digest
  • Academic Update
  • Topics
  • RSS feed rss feed
  • Site map

ABOUT

  • Contact us
  • Advertise
  • Submit an article
  • Editorial calendar
  • Privacy policy
  • Terms & conditions

SUBSCRIBE

  • Academic Update
  • CPE Express

AICPA & CIMA SITES

  • AICPA-CIMA.com
  • Global Engagement Center
  • Financial Management (FM)
  • The Tax Adviser
  • AICPA Insights
  • Global Career Hub
AICPA & CIMA

© 2025 Association of International Certified Professional Accountants. All rights reserved.

Reliable. Resourceful. Respected.