Roth conversions can play an important role in every Partner Physician’s retirement income plan. The key to success, however, is creating a strategy that takes the nuances of the Common Plan into account to gain the greatest possible benefits from this tax-wise investment tool.
Roth IRAs are a unique type of retirement savings account that allows contributions to be made with after-tax dollars. The significant advantage of these accounts is that, under current U.S. tax laws, qualified distributions from Roth IRAs are completely tax-free in retirement, including both the original contributions and any accumulated earnings. Distributions are also tax-free, which is true for heirs of the account as well. An added bonus: Roth accounts are not subject to Required Minimum Distributions (RMDs), giving retirees greater control over how and when they choose to use their assets.
The downside of a traditional Roth IRA is that the income eligibility requirements for these accounts prohibit most Partner Physicians from contributing at all. In 2026, single tax filers must have a modified adjusted gross income (MAGI) of less than $153,000 (phased out between $153,000 and $168,000), while married tax filers filing jointly must have a joint MAGI of less than $242,000 (phased out between $242,000 and $252,000; no contribution at $252,000 or more).
That doesn’t mean, however, that all is lost! After separation from the partnership (retirement or early retirement), Partner Physicians can benefit from the tax-free growth of a Roth account by completing a Roth conversion—a transfer of assets from a traditional retirement account (which offers tax deductions on contributions but is taxed on withdrawals) into a tax-advantaged Roth IRA. Using this conversion strategy, taxes are paid on the amount converted, but the funds in the Roth IRA grow tax-free and can be withdrawn tax-free in retirement (provided certain conditions are met).
Making a Roth conversion work for you requires a strategy aimed at reducing the amount of taxes paid at the time of the original contribution. This is particularly important for Partner Physicians. Here’s why:
- It is likely that you will be in a higher tax bracket during your earning years than in retirement. This is because as your income increases, so does your tax bracket, so a larger portion of your income is taxed. In retirement, your income is likely to go down, placing you in a lower tax bracket and reducing the percentage rate you are taxed on your income.
- However, as a Partner Physician, you will receive a return of your ownership stake (sometimes referred to as the Common Plan or Pension) as an annuity in retirement. This valuable benefit will raise your earnings in retirement—and your marginal tax bracket. This means that you will pay a higher percentage in taxes than most retirees.
- Because it is most beneficial to make a Roth conversion when your marginal tax rate is lowest, delaying your common plan/pension payments in your first year of retirement may be advantageous, allowing you to make a large, one-time Roth conversion at a much lower effective tax rate.
- You may also want to consider using a ‘topping off tax bracket strategy.’ This involves making Roth contributions up to the threshold of the next-highest tax bracket for multiple years. (If you do this after age 63, keep an eye on the Medicare income tax tables as higher-income retirees must pay a Medicare surcharge the year after they have high income.)
By paying close attention to the tax implications of Roth contributions and balancing your withdrawals from taxable retirement accounts like traditional IRAs with tax-free withdrawals from a Roth IRA, you can better manage your tax burden in retirement. As well, because the funds in your Roth account are taxed at the time of contribution and not after, a Roth account offers added protection against the potential of rising tax rates in the future.
Contact to our team today to create a personalized plan that puts Roth conversions and other powerful retirement tools to work for you.
