Don Hilario, CFP®, Hilpan Moxie Wealth Management, LLC - an investment adviser registered with the State of California.

One of the most common questions I get from Google employees after they leave the company is surprisingly simple:

“Should I do my Roth conversion now?”

My answer usually isn’t.

Instead, I ask a question of my own.

“Did you receive a severance?”

Most people expect the conversation to begin with tax brackets. I don’t.

Before deciding how much to convert, I want to understand what kind of year this actually is.

Are you taking a few months off before another role?

Is this retirement?

Do you have enough cash to support yourself while you’re looking for work?

What has your effective tax rate looked like over the last couple of years?

And perhaps most importantly, what does your income for this year actually look like?

Those answers determine the Roth conversion- not the calendar.

Leaving Google Doesn’t Automatically Create a Low-Tax Year

Many people leave Google and immediately think:

“This is my low-income year.”

Maybe.

But that’s not the same thing as saying it’s a low-tax year.

That’s where I think people get tripped up.

Once someone leaves Google, they mentally close that chapter. Payroll has stopped, so they naturally assume most of their income has stopped too.

The IRS doesn’t see it that way.

A tax return doesn’t care when your employment ended. It cares what happened during the entire calendar year.

That’s an important distinction.

Your Salary Is Only One Piece of the Picture

Before sizing a Roth conversion, I want to understand everything that’s already happened, or is likely to happen, during the year.

That includes questions like:

Did you receive severance? Did RSUs vest before you left? Have you sold any Google stock and realized capital gains? Will your portfolio generate dividends or taxable interest later this year? Are you expecting consulting income or another job before year-end?

Individually, none of these necessarily change the answer.

Collectively, they often do.

I’ve seen someone appear to have a wide-open tax bracket in May, only to realize by year-end that much of it had already been filled by income they simply hadn’t accounted for yet. (That example is a hypothetical illustration, not an actual client.)

The Roth conversion wasn’t the problem.

The estimate underneath it was.

Why I Sometimes Wait Until the Fourth Quarter

This surprises people.

Sometimes my recommendation is to wait.

Not because Roth conversions are bad.

Not because I don’t like being proactive.

But because waiting gives us a clearer picture of the year.

By the fourth quarter, we usually have nine or ten months of actual income instead of estimates.

We can review year-to-date pay information, account for RSUs that have already vested, understand investment income that’s already been realized, coordinate with your CPA if needed, and estimate what’s still expected before December 31.

Now we’re making a decision based on evidence- not assumptions.

That’s a very different conversation.

The Goal Isn’t the Biggest Roth Conversion

When clients ask me how much they should convert, they’re often surprised by my answer.

The goal isn’t to convert the most.

The goal is to convert the maximum amount that keeps you in your sweet spot.

For many of my clients, that’s often somewhere around the 22% to 24% federal tax bracket, though every situation is different.  Tax brackets and their thresholds are set by the IRS and change over time; the brackets referenced here are illustrative of recent tax years and are not a prediction of future rates.

Once you move into the next bracket, the tradeoff becomes much more meaningful, which is why getting the numbers right matters.

But before we can size the conversion, we have to earn the right to make that decision.

That means understanding the year’s income- not guessing at it.

A Conversion Has a Cost, Too

It’s worth being clear about the other side of the ledger. A Roth conversion isn’t free.

The amount you convert is generally taxable as ordinary income in the year you convert it, which means you’re choosing to pay tax now in exchange for tax-free growth and withdrawals later.

A conversion is also generally irreversible- the ability to undo (or “recharacterize”) a conversion was eliminated by the Tax Cuts and Jobs Act.

Converting too much can push you into a higher bracket, increase the taxable portion of Social Security, or raise future Medicare premiums (IRMAA).

Whether the long-term benefit outweighs that upfront cost depends entirely on your own facts, which is exactly why the sizing matters.

Don’t Forget Health Insurance

One more consideration has become much more important.  If you’ve left Google and are buying health insurance through the Marketplace, your Roth conversion affects more than your tax bracket.

It also increases your modified adjusted gross income (MAGI), which can affect your eligibility for premium tax credits.

That’s another reason I don’t look at Roth conversions in isolation. Tax planning, cash flow, equity compensation, and healthcare decisions often overlap. Looking at only one piece can lead to a very different outcome than looking at the whole picture.

The Bottom Line

A low-income year can be one of the best opportunities you’ll ever have to do a Roth conversion.

But first, make sure it actually is one.

Leaving Google doesn’t automatically create a low-tax year. It simply creates a transition year.

The best Roth conversion isn’t the earliest one.

It isn’t the biggest one, either.

It’s the one that’s sized after you’ve taken the time to understand the entire year.

That’s usually where the sweet spot is.

Keep going

If equity compensation is part of your picture, my cornerstone guide on RSUs walks through how the pieces fit together-  RSU guide for tech employees

Prefer to talk it through?

Schedule a quick call and we’ll look at your year together (click here)

This article is for educational purposes only and should not be considered personalized tax, legal, or investment advice. The scenario above is a hypothetical composite based on common planning situations. Always consult your CPA and financial advisor before making tax-related decisions.

Hilpan Moxie Wealth Management, LLC is an investment adviser registered with the State of California. Registration does not imply a certain level of skill or training. This communication does not constitute an offer to provide advisory services in any jurisdiction where the firm is not registered or exempt from registration. Tax laws, tax brackets, and Marketplace premium-credit rules referenced above are current as of the date of publication and are subject to change.