You can roll any amount of money from a traditional IRA, 401(k), or similar plan into a tax-free Roth IRA regardless of how much income you earn. There’s a cost to this transfer, however—perhaps a big one. You pay current income taxes on the money you move even though you don’t withdraw any of the cash. Sometimes the tax is worth paying, sometimes not.
You might want to switch to the Roth if: (1) You don’t expect to need the money until your later age, if ever. (2) You plan to leave most or all of the Roth to your heirs and want them to receive it tax free. (3) You expect to be in the same (or a higher) tax bracket when you retire, although you can’t know for sure. (4) You’re young enough so that the future growth in your investments could more than offset the cost of paying the current tax. (5) You can pay the taxes due from outside funds without having to take money out of your tax-sheltered retirement account.
You might not want to switch to the Roth if: (1) You’ll have to use funds from the IRA to pay the tax. That greatly reduces the amount of money left to grow tax deferred. (2) You expect to drop to a lower tax bracket when you retire. (3) The Medicare tax on the transfer would bump you into a higher bracket. (4) You’re 65-plus and expect to withdraw a substantial amount of your IRA during your retirement.
In short, Roth conversions are great for people who don’t need the money and want to pass most of it to heirs tax free. For the average person, however, the size of the current tax might overwhelm any likely benefit from future tax-free growth.