By SR Staff
Here's a question that trips up even careful savers: would you rather pay taxes now, or pay taxes later — plus whatever tax rates happen to look like decades from now? A Roth conversion forces you to answer that question with real money, today, on a form you have to sign.
Done well, a Roth conversion can lower your lifetime tax bill, shrink future required minimum distributions, and leave your heirs a tax-free inheritance. Done carelessly, it can push you into a higher bracket, trigger a Medicare premium surcharge, and hand the IRS a bigger check than necessary. The difference usually comes down to how much you convert and when.
What a Roth Conversion Actually Does
A Roth conversion moves money from a traditional IRA or 401(k) into a Roth IRA. You pay ordinary income tax on the converted amount in the year you convert, and in exchange, that money grows tax-free forever and comes out tax-free in retirement — no matter how large the account grows.
If you're still deciding between account types in the first place, it's worth starting with the basics in our guide to Roth IRA vs. Traditional IRA. A conversion is really just a bet that you're better off paying tax at today's rate than at whatever rate applies when you eventually withdraw the money.
When a Roth Conversion Makes Sense
Conversions tend to pay off most in a narrow window: after you've stopped working but before Social Security and RMDs start pushing your taxable income back up. In those low-income years, you may have room to convert a meaningful amount without leaving your current tax bracket.
A few situations where conversions are worth a serious look:
- You're retired early and living on savings. Your taxable income is temporarily low, so converting fills up the lower brackets instead of wasting them.
- You expect tax rates to rise. If you believe your bracket — or tax law generally — will be higher later, paying tax now can be the cheaper option.
- You want to reduce future RMDs. Every dollar you convert is a dollar the IRS can no longer force you to withdraw and tax at 73.
- You're leaving money to heirs. Non-spouse beneficiaries must empty inherited IRAs within 10 years. A Roth spares them from adding that income on top of their own paychecks.
Conversions make less sense if you're still working at your peak earning years, if you'd need to pay the conversion tax out of the IRA itself (which shrinks the benefit considerably), or if you expect your tax bracket to drop significantly in retirement anyway.
The Tax Cost — and How to Calculate It
The math starts with your current marginal bracket. For 2026, federal brackets run from 10% up through 37%, with the 10% rate applying to married couples filing jointly with income up to $24,800 and the top 37% rate kicking in above roughly $768,700. The goal of most conversion strategies is simple: fill up your current bracket to the top of it, without spilling into the next one.
Say a married couple has $70,000 of taxable income after deductions and sits comfortably in the 12% bracket. If that bracket's ceiling is around $103,000, they have roughly $33,000 of room to convert at 12% before crossing into the 22% bracket. Converting within that room keeps the tax cost predictable; converting beyond it means the extra dollars get taxed at a meaningfully higher rate.
This is where working with a CPA or fee-only planner earns its keep — running the actual numbers against your current tax situation is far more reliable than applying a generic rule of thumb.
The IRMAA Trap: Watch Your Medicare Premiums
If you're 63 or older, there's a second ceiling to watch besides your tax bracket: the income-related monthly adjustment amount, or IRMAA, which determines what you pay for Medicare Part B and Part D. IRMAA looks back two years, so a large conversion in 2026 can raise your Medicare premiums starting in 2028.
Unlike tax brackets, IRMAA works as a cliff, not a slope. For 2026, the first surcharge tier applies once modified adjusted gross income crosses roughly $109,000 for individuals or $218,000 for married couples filing jointly. Go even one dollar over that line, and you owe the full surcharge for the entire year — an extra $974 or more per person, annually, just from crossing the threshold.
The practical takeaway: if you're within a few years of Medicare enrollment, check where the nearest IRMAA threshold sits before you convert, not after.
How Much Should You Convert?
There's no single "right" number, but a reasonable process looks like this:
- Estimate your total taxable income for the year, including Social Security, pensions, and investment income.
- Find the top of your current tax bracket and calculate how much room remains.
- If you're 63 or older, check the nearest IRMAA threshold and treat it as a hard stop.
- Convert an amount that fills available room without crossing either line.
- Pay the resulting tax bill from cash or a taxable account — not from the IRA itself.
Many retirees find it more effective to convert smaller amounts across several years rather than one large lump sum. This "conversion laddering" approach spreads the tax hit and gives you more control over which bracket each dollar lands in, which also supports a more tax-efficient approach to building retirement income overall.
The Bottom Line
A Roth conversion isn't a yes-or-no decision so much as a how-much-and-when decision. The years between retirement and RMDs are often the cheapest window you'll get to convert, but the benefit disappears quickly if you overshoot your bracket or trip an IRMAA threshold. Run the numbers each year, convert in the room you actually have, and let time do the rest.
Written by: Seeking Retirement