Skip to content
Independent money guidance
Clear Money Guide
Start here
Menu

Converting in a Down Market (2026)

Clear Money Guide

What this guide covers

A quick view of the questions and evidence developed below.

The arithmetic
The discipline problem
Sources
Related

Comparison tables scroll horizontally on smaller screens.

Updated July 28, 2026. Quick answer: You convert a number of shares but you are taxed on their value. Converting while the account is depressed moves the same holdings for less tax, and everything the recovery adds happens inside the Roth, tax-free.

The arithmetic

Convert at the peakConvert 25% down
Shares moved1,0001,000
Value taxed$100,000$75,000
Tax at 24%$24,000$18,000
Recovery to $100,000Happens inside the Roth, untaxed

Same holdings, same eventual value, $6,000 less tax — purely from when the measurement was taken.

The old escape hatch is gone. Before 2018 you could convert, watch the market fall, and undo it. That option was repealed, so converting into a falling market is now a one-way bet — which argues for converting in tranches rather than all at once.

The discipline problem

This requires acting when markets are frightening, which is when almost nobody executes optional tax manoeuvres. Deciding the trigger in advance — a percentage decline, a fixed amount — is the difference between a strategy and a good intention.

Price the conversion before you make it

A conversion cannot be undone once it is done, so it is worth having someone model the bracket it fills, the knock-on effects on your other income and how long the money has to compound before you settle on an amount.

Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.

The Kapitalwise form opens here. You stay on this page.

What happens when you press the button

It asks about nine questions (age, investable assets, location), then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button. Submitting the form does not guarantee an adviser or a match. This matching form is not tax or legal advice.

Sources

IRC §408A (Roth IRAs); IRC §408A(d)(3) (conversions); IRC §1411 (net investment income tax); IRC §86 (taxation of Social Security benefits); IRC §6654 (estimated tax); Tax Cuts and Jobs Act (2017) §13611 (repeal of conversion recharacterisation). Cross-checked July 2026 against professional analyses. Indexed thresholds are described rather than asserted, because they change annually.

This states what the cited authority says. It is not tax advice, and a conversion interacts with the rest of your return in ways one page cannot see.

Related

A depressed balance changes what a conversion costs, not how much room you have to absorb it. The Roth conversion bracket calculator takes the income you expect before any conversion and returns the room left in your bracket and the federal tax on filling it, so the shares you move while the value is low can be sized to the bracket rather than to the moment.

See whether an adviser match is worth comparing