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 You pay income tax on the converted amount now, but then the money grows and can be withdrawn tax-free forever.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:
- Tax law can change. The 2025 reconciliation law, P.L. 119-21, made several TCJA individual tax provisions permanent under current law, so the previously expected 2025 sunset is no longer the basis for 2026 planning. Future Congresses can still change tax rules. See the Congressional Research Service summary.
- RMDs force withdrawals from Traditional accounts at the required beginning age, generally 73 for people born in 1951–1959 and 75 for those born in 1960 or later
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
- Taxable income before any conversion: $70,000 for tax year 2026 (illustrative assumption)
- Filing status: Single
- Current marginal bracket: 22% (2026 single-filer taxable income over $50,400 and up to $105,700)
Without Roth conversions: Assuming 5% annual growth and no withdrawals for 17 years, Sarah's account would be about $1.84 million at age 75. Because she was born after 1959, age 75 is generally her RMD starting age. Using the standard Uniform Lifetime Table divisor of 24.6, a simplified first RMD estimate is about $74,600; her actual amount depends on the prior year-end balance, account rules, and any applicable exception.
With strategic Roth conversions: Sarah could compare annual conversions before her RMDs begin. With the 2026 assumptions above, the remaining room to the top of the 22% bracket is about $35,700 before considering other income, deductions, credits, or interactions. An illustrative $30,000–$35,000 conversion for 17 years would total $510,000–$595,000 before investment growth and withdrawals; it is not a recommendation or a tax-savings estimate. Brackets and her income can change each year, so the decision needs to be recalculated annually.
This example does not establish which strategy saves more tax. A fair comparison must include future income, tax law, Medicare premiums, state taxes, and the source used to pay the conversion tax.
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)
These are 2026 federal taxable-income thresholds, not the bracket inputs currently used by RetirePro's in-app tax engine. See the IRS 2026 inflation adjustments. Taxable income is calculated after applicable deductions.
| Taxable Income | Tax Rate |
|---|---|
| $0 - $12,400 | 10% |
Calculate your Roth conversion sweet spot
Find the conversion amount that minimizes lifetime taxes without triggering bracket creep.
Calculate My Conversion →| $12,401 - $50,400 | 12% | | $50,401 - $105,700 | 22% | | $105,701 - $201,775 | 24% | | $201,776 - $256,225 | 32% | | $256,226 - $640,600 | 35% | | $640,601+ | 37% |
Step 2: Calculate Your "Room" in the Current Bracket
Bracket ceiling - Your current taxable income = Conversion room
Sarah's example: $105,700 (top of 22%) - $70,000 (assumed taxable income before conversion) = $35,700 of illustrative 22% bracket room.
Other income, deductions, credits, and tax-law changes can reduce that room. A conversion should be modeled with the actual facts for that tax year.
Step 3: Factor in the Hidden Costs
Roth conversions can trigger:
- IRMAA surcharges on Medicare premiums when income exceeds the applicable filing-status threshold (generally using a two-year lookback)
- Higher capital gains rates on taxable investments
- Loss of ACA subsidies (if on marketplace health insurance pre-65)
- Net Investment Income Tax (3.8% when modified AGI exceeds $200,000 for single filers or $250,000 for married couples filing jointly)
A conversion analysis should account for these effects where relevant and use current-year rules.
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
Retirement projections can help compare scenarios, but Monte Carlo results do not determine an optimal tax strategy. RetirePro's in-app federal tax engine uses 2026 bracket inputs (IRS Rev. Proc. 2025-32); it is a tax-year 2026 estimator, not individualized tax advice. Verify any 2026 conversion analysis against current IRS guidance and with a qualified tax professional.
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's Tax Planning tools can support scenario exploration, but their estimates are not individualized tax advice and the in-app federal tax engine uses 2026 bracket inputs (IRS Rev. Proc. 2025-32). Confirm 2026 tax effects with a tax professional before acting. See the methodology and calculation limitations.
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? → A conversion may be worth modeling, but compare current taxes with future income, benefits, and account rules.
- Are you in the 22% or 24% bracket? → Compare multi-year scenarios; do not assume future rates will be higher or lower.
- Are you in the 32%+ bracket? → Review the full tax cost and alternatives with a tax professional.
- Have you reached your birth-year-specific RMD age? → Take any required RMD first; an RMD cannot itself be converted to a Roth IRA. Additional amounts may be eligible for conversion if other rules are met.
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 →