The market just fell 15 percent and your traditional IRA is down $30,000. It feels like the worst possible moment to do anything with retirement money. But if you were already planning Roth conversions, a dip is arguably the cheapest day of the year to do one. Kiplinger lists a market downturn as one of the five best windows for a Roth conversion, and the logic is simple: you are converting shares, not dollars.
When the market drops, the shares get cheaper but the tax code only sees the dollar value on conversion day. Convert $40,000 of an IRA that fell from $200,000 to $170,000, and you report $40,000 of taxable income. That $40,000 represents about 23.5 percent of your shares. When the market recovers to $200,000, those same shares are worth about $47,059, and every dollar of the recovery sits inside the Roth, growing tax free. Convert the same shares after the recovery and you pay tax on $47,059 instead of $40,000, for the identical ending position.
The bracket effect is the part people underrate. A down market does not change your tax rate, but it lets you move more of the account at the same rate. Kitces has made this point well: the converted dollars represent a larger percentage of the pre-tax account, so a bigger slice of the account's future growth gets shifted into the Roth without pushing you into a higher bracket. It is the same tax cost, buying more of the future.
Where the tax money comes from matters as much as the conversion
Here is the tangent that decides whether the strategy actually works: pay the conversion tax from cash, not from the IRA. If you withhold the tax from the conversion itself, you shrink the amount that lands in the Roth, which gives back part of the downturn advantage. Worse, if you are under 59 and a half, the withheld portion can trigger the 10 percent early withdrawal penalty on top of the tax. The clean version of this strategy is: conversion from the IRA, tax bill from savings.
That requirement is also the honest limit on the strategy. If paying the tax from cash would drain your emergency fund, the downturn discount is not worth it. The math only works when the conversion was already sensible at your current tax rate. A dip makes a good conversion cheaper; it does not make a bad conversion good.
And do not try to time the bottom. The advisors who study this professionally keep coming back to the same hierarchy: your tax bracket first, your available tax window second, your ability to pay the tax efficiently third. Market timing is not on the list. If a conversion makes sense this year, doing it during a dip beats doing it at the peak. Beyond that, precision is luck, and luck is not a strategy.
My recommendation: if you run a Roth conversion ladder and the market drops 10 percent or more in a year you were converting anyway, treat it as a sale. Convert the same dollar amount you planned, which now moves more shares, or convert more shares for the same tax cost. Just keep the five-year rule straight for each conversion, because a cheaper conversion you withdraw early is not cheaper at all.
Model your conversion ladder with the 5-year unlock schedule
Frequently asked questions
Should you convert to Roth when the market is down?
If you were already planning to convert at your current tax rate, yes. You pay tax on the depressed value and the recovery grows tax free inside the Roth.
How big is the savings?
On a $40,000 conversion after a 15 percent drop, you pay tax on $40,000 instead of about $47,059 for the same shares after a recovery. At a 22 percent bracket, that is roughly $1,553 less tax for the identical ending position.
Should the tax come from cash or the IRA?
Cash. Paying from the IRA shrinks the Roth balance and can trigger the 10 percent early withdrawal penalty under 59 and a half. Our full breakdown is in paying conversion taxes from IRA or cash.
What can go wrong?
Converting more than your bracket allows, tripping IRMAA or ACA subsidy cliffs, or botching the five-year rule on each conversion. See common Roth ladder mistakes before you move money.
Sources: Kiplinger, "Five Windows of Opportunity for Roth Conversions"; Kitces, "Leveraging Tax Advantages of Roth Conversion in Bear Markets"; NerdWallet, "Roth Conversion Ladder." Figures verified October 2026.