Should I do Roth IRA conversions after a market crash?

I have too much money in my traditional IRA and not enough money in my Roth IRA. Both accounts use VTSAX. I have no intention of touching it any time soon. Since it seems that markets tend to drop quickly (& noisily) and come back slowly (& quietly), why don't I wait until the next market crash, and THEN convert a lot from traditional to Roth?

I presume that after the market comes back from a crash its recovered (Roth) gains will be tax free. And my loss from selling (traditional) may generate a capital gains loss (probably not). I'll certainly be paying less taxes on each share of post-crash VTSAX.

But I'm just selling VTSAX shares in this account to buy them in another. Can this be construed to be a wash sale by IRS? (It's really just a Roth conversion, sir.)

Since I've had these accounts for a long time, I think my basis is very low. So that I may have some capital gains even after a major correction. Would this would moot the wash sale rule?

Is this a stupid strategy? Are there any gotchas I haven't foreseen?

  • In tax-deferred accounts like trad IRA and 401k there are no taxable gains, losses or basis, and the wash-sale rule doesn't apply. Incidentally, if you hold both IRAs with Vanguard as I do, you can convert in kind: from top nav use 'My Accounts / Balances and Holdings' and there are a bunch of options at the top of the trad-IRA section including 'Convert to Roth IRA' and you can select either dollars or fund shares (but not both at once unless you do whole-account which I and you don't want). For any other trustee I don't know but if you don't see it you might as well ask. Commented Apr 7, 2021 at 3:39

2 Answers 2


Yes, it can count as a wash sale, but not under the situation you're describing.

The effect of a wash sale is basically that an otherwise-deductible capital loss can not be deducted.

Any capital gains from a sale inside either a Traditional or Roth IRA (or 401(k)) is not taxable. Similarly, any capital loss from such a sale is not deductible. So if these are your only two accounts, you don't need to worry about a wash sale because you wouldn't be able to deduct the loss anyway.

However, the gotcha here is that if you were to sell VTSAX at a loss in a taxable account, and do this Roth conversion such that you were buying VTSAX shares (even in your tax-advantaged account) within 30 days, the loss in the taxable account, which you would have been able to deduct, is no longer deductible.

The real tax concern here is income tax. Withdrawals from a Traditional IRA (or 401(k)) - including Roth conversions - are taxed as ordinary income (unless they were post-tax contributions to a traditional account, which is less common and you haven't indicated that this is the case here). With an ordinary withdrawal, you can use the funds withdrawn to cover the tax bill. With a conversion, you need to have the cash on-hand elsewhere to cover the tax.

This concern is why it makes sense to do such a conversion when the market is at a low point. You can move a larger number of shares while keeping the actual dollar amount of the conversion lower, limiting your tax liability.


Your assumptions are incorrect. It is not a dumb strategy, just misguided.

100% of withdrawals, from things like IRAs and 401Ks are taxed. It is not just the profit but every penny withdrawn. If a hypothetical person, put in 10K into an IRA/401K, but went to withdraw it and it was only 8K total, they would pay taxes on 8K.

Often times people perform Roth conversions when they have a favorable income tax situation. If a person had low income in a given year, they might opt to do a large Roth conversion to take advantage of the lower tax bracket.

Similarly, if they made 5K less than the tax threshold into the next bracket, they might do a Roth conversion for something slightly less than 5K.

Congratulations on having too much money in an IRA. It is a problem most Americans do not have.

  • 1
    Thank you. I've sat tight after the last two major corrections (2008, 2020), and have come out the other side OK. But I got to wondering whether I could make the post-crash rebound tax-free by converting traditional to Roth at the bottom. Commented Apr 6, 2021 at 15:53
  • 1
    @StevePoling - just be aware it is incredibly hard to pick bottoms. It's incredibly hard to pick dips. It's incredibly hard to pick crashes. Take care
    – Fattie
    Commented Apr 6, 2021 at 16:21

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