What Is a Roth Conversion (and Why Does It Matter)?
A Roth conversion is when you move money from a Traditional IRA or 401(k) into a Roth IRA. You pay income tax on the converted amount now, but then the money grows and can be withdrawn tax-free forever.
Think of it as pre-paying your taxes at today's rates instead of gambling on future rates.
Why this matters in 2026:
- Federal debt is $36+ trillion — many experts expect taxes to rise
- TCJA provisions are set to sunset after 2025 — tax brackets may increase
- RMDs force withdrawals from Traditional accounts starting at age 73, often at the worst possible time
If you have a large Traditional IRA or 401(k), a Roth conversion strategy could save you tens of thousands of dollars in lifetime taxes.
When Does a Roth Conversion Make Sense?
✅ Good Candidates for Roth Conversion
- Currently in a low tax bracket (income dip year, early retirement, between jobs)
- Large Traditional IRA/401(k) balance that will generate big RMDs later
- Expect to be in a higher bracket in retirement (pension, Social Security, spouse's income)
- Long time horizon (the more years of tax-free growth, the bigger the benefit)
- Want to leave a tax-free inheritance (Roth IRAs pass tax-free to heirs)
❌ Poor Candidates for Roth Conversion
- Already in the highest tax bracket (37%) — no bracket arbitrage available
- Need the money in under 5 years (5-year rule applies to conversions)
- Would have to sell investments at a loss to pay the tax bill
- The tax bill would come from the IRA itself (reduces the benefit significantly)
The Math Behind Roth Conversions
Let's walk through a real example.
Scenario: Sarah, Age 58
- Traditional IRA balance: $800,000
- Other income: $50,000/year (part-time work)
- Filing status: Single
- Current tax bracket: 22% (income $47,151 - $100,525 in 2026)
Without Roth conversions: At age 73, Sarah's Traditional IRA could be ~$1.6M (at 5% growth). Her first-year RMD would be ~$60,000, plus Social Security of ~$30,000, plus any other income. That's easily $90,000+ in taxable income — pushing her into the 24% or higher bracket.
With strategic Roth conversions: Between ages 58-72 (before RMDs start), Sarah converts $40,000/year. This:
- Fills up the 22% bracket each year
- Moves $600,000+ into Roth over 15 years
- Drastically reduces future RMDs
- Keeps her in a lower bracket during retirement
Estimated savings: $50,000-$80,000 in lifetime taxes.
How to Calculate Your Optimal Roth Conversion Amount
The "optimal" conversion amount is the one that fills your current tax bracket without pushing you into the next one.
Step 1: Know Your 2026 Tax Brackets (Single Filers)
| Taxable Income | Tax Rate |
|---|---|
| $0 - $11,925 | 10% |
| $11,926 - $48,475 | 12% |
| $48,476 - $103,350 | 22% |
| $103,351 - $197,300 | 24% |
| $197,301 - $250,525 | 32% |
| $250,526 - $626,350 | 35% |
| $626,351+ | 37% |
Step 2: Calculate Your "Room" in the Current Bracket
Bracket ceiling - Your current taxable income = Conversion room
Sarah's example: $103,350 (top of 22%) - $50,000 (her income) = $53,350 she could convert at the 22% rate.
In practice, she converts $40,000-$50,000 to stay safely within the bracket.
Step 3: Factor in the Hidden Costs
Roth conversions can trigger:
- IRMAA surcharges on Medicare premiums (if income exceeds $106,000 for singles)
- Higher capital gains rates on taxable investments
- Loss of ACA subsidies (if on marketplace health insurance pre-65)
- Net Investment Income Tax (3.8% on income above $200,000)
A good Roth conversion calculator accounts for all of these.
Step 4: Model Over Multiple Years
A single-year calculation is misleading. The real question is: "What's the optimal conversion strategy over my remaining pre-RMD years?"
This requires projecting:
- Future account growth
- Social Security start date and amount
- RMD amounts at various ages
- Tax bracket changes over time
- Medicare premium impacts
This is exactly what RetirePro's dashboard calculates — it runs 1,000 Monte Carlo simulations with different conversion strategies to find your optimal path.
Common Roth Conversion Mistakes
Mistake 1: Converting Too Much in One Year
If you convert $200,000 in a single year, you might jump from the 22% bracket to the 35% bracket. It's usually better to spread conversions across multiple years.
Mistake 2: Ignoring IRMAA
Medicare IRMAA surcharges use a 2-year lookback. A large conversion in 2026 increases your Medicare premiums in 2028. For some retirees, this adds $2,000-$6,000/year in unexpected costs.
Mistake 3: Paying Taxes From the IRA
If you convert $50,000 and pay the ~$11,000 tax bill from the IRA itself, you only put $39,000 into the Roth. The math works much better when you pay taxes from a separate account.
Mistake 4: Not Converting During Market Dips
A market crash is actually the best time to do a Roth conversion:
- Your IRA balance is lower, so less tax is due
- When the market recovers, all that growth happens inside the Roth (tax-free)
- You convert more shares for less tax
Mistake 5: Forgetting State Taxes
Federal taxes aren't the whole picture. If you live in a high-tax state (California, New York, New Jersey), your effective rate on conversions could be 30%+. Consider whether you might move to a no-income-tax state in retirement.
Roth Conversion Calculator: Try It Free
RetirePro includes a built-in Roth conversion analysis tool that:
- Calculates your optimal conversion amount per year
- Projects the tax impact over your entire retirement
- Factors in RMDs, Social Security, and Medicare (IRMAA)
- Runs Monte Carlo simulations to account for market uncertainty
- Shows the breakeven point (when the Roth strategy "wins")
No signup required. Your data stays on your device.
Open the Roth Conversion Calculator →
Already have a RetirePro account? The Roth conversion analysis is available on the Tax Planning tab.
Quick Decision Framework
Should you do a Roth conversion this year?
- Are you in the 10% or 12% bracket? → Almost always yes. Convert up to the bracket ceiling.
- Are you in the 22% or 24% bracket? → Probably yes, especially if you expect higher brackets in retirement.
- Are you in the 32%+ bracket? → Maybe, only if you expect to stay in the same bracket (or higher) during RMDs.
- Are you over 73 and already taking RMDs? → Limited benefit, but can still make sense in some cases.
The only way to know for sure is to run the numbers with a calculator that models your full picture — not a back-of-the-napkin estimate.
Run your Roth conversion analysis →