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 now, but the money then grows and comes out tax-free for the rest of your life. The decision to convert is not about whether you like paying taxes today; it is about whether paying a known tax rate now saves you from a higher effective rate later, after factoring in RMDs, Social Security taxation, Medicare surcharges, and the tax rates your heirs will face on inherited IRAs.
There is no income limit on who can do a Roth conversion, and no cap on how much you can convert in a single year. The only constraint is how much tax you are willing to pay in the conversion year.
A Roth conversion is straightforward in concept. You direct your IRA custodian to move money from your traditional IRA (or roll over from a 401(k)) into a Roth IRA. The custodian reports the conversion on Form 1099-R with a distribution code of 02 (early distribution, exception applies) or 07 (normal distribution), depending on your age. You report it on your tax return using Form 8606, Part II, and the converted amount is added to your ordinary income for that year.
There is no income limit on who can do a Roth conversion. There is also no cap on how much you can convert in a single year. Technical detail
You pay the tax with outside funds -- not by withholding from the conversion itself. If your custodian withholds 20% for taxes, that withheld amount is treated as a distribution, not a conversion, potentially triggering a 10% early withdrawal penalty if you are under 59 1/2. IRS Publication 590-A.
The most valuable Roth conversion window opens when your income drops but before mandatory withdrawals begin. For many people, this happens between retirement (when the paycheck stops) and age 73 (when RMDs start). SECURE 2.0 Act, Section 107. RMD age is 73 for those born 1951-1959, rising to 75 for those born 1960 or later.
During these "gap years," you may have little or no taxable income beyond Social Security (if you have started claiming) and modest investment income. That puts you in the 10% or 12% federal tax bracket -- sometimes even the 22% bracket, depending on the numbers. Filling up those lower brackets with Roth conversions means paying 12% or 22% now on money that would otherwise be taxed at 24% or higher once RMDs, Social Security, and other income stack up.
Here is why the math works: once RMDs begin on a $1.5 million traditional IRA, the annual required withdrawal at age 73 is roughly $56,600 (using the Uniform Lifetime Table factor of 26.5). IRS Publication 590-B, Table III. Add Social Security benefits, and many couples land squarely in the 22% or 24% bracket. If the account continues to grow, the RMDs grow with it, pushing future tax rates even higher. Meanwhile, every dollar that sits in a Roth IRA has no RMDs and no future tax consequences at all.
Tax Bracket Optimization: A Concrete Example
Meet David and Linda, both 62, married filing jointly, recently retired. They have $1.5 million in a traditional IRA, $200,000 in taxable brokerage accounts, and expect combined Social Security benefits of $50,000 per year (they plan to claim at 67). Neither has started Social Security yet. Their 2026 federal tax picture during the gap years looks approximately like this.
2026 tax brackets, married filing jointly:
- 10%: taxable income up to $24,800
- 12%: $24,801 to $100,800
- 22%: $100,801 to $211,400
- 24%: $211,401 to $403,550
Tax Foundation, 2026 Federal Income Tax Brackets. Standard deduction for MFJ: $32,200.
Before Social Security, David and Linda's only income is about $25,000 from dividends and interest. After the standard deduction of $32,200, their taxable income is essentially zero. They have the entire 10% and 12% brackets available for Roth conversions -- roughly $100,800 in taxable income space.
Year-by-Year Conversion Plan (Ages 62-72)
| Year | Ages | Conversion Amount | Taxable Income After Std. Ded. | Marginal Bracket | Approx. Federal Tax on Conversion |
|---|---|---|---|---|---|
| 2026 | 62-63 | $125,000 | ~$117,800 | 22% | ~$14,600 |
| 2027 | 63-64 | $125,000 | ~$117,800 | 22% | ~$14,600 |
| 2028 | 64-65 | $125,000 | ~$117,800 | 22% | ~$14,600 |
| 2029 | 65-66 | $125,000 | ~$117,800 | 22% | ~$14,600 |
| 2030 | 66-67 | $100,000 | ~$92,800 | 12% | ~$10,700 |
| 2031 | 67-68 | $80,000 | ~$105,300* | 22% | ~$13,600 |
| 2032 | 68-69 | $80,000 | ~$105,300* | 22% | ~$13,600 |
| 2033 | 69-70 | $80,000 | ~$105,300* | 22% | ~$13,600 |
| 2034 | 70-71 | $80,000 | ~$105,300* | 22% | ~$13,600 |
| 2035 | 71-72 | $80,000 | ~$105,300* | 22% | ~$13,600 |
*Starting at 67, Social Security adds $50,000 in benefits, of which up to 85% ($42,500) may be taxable.
Over ten years, David and Linda convert $1,000,000 of their $1.5M traditional IRA to Roth, paying roughly $137,000 in federal taxes. That leaves about $500,000 remaining in the traditional IRA (plus growth), generating RMDs around $19,000 per year at age 73 instead of $56,600. The difference in lifetime RMD taxes, plus the tax-free growth and withdrawal benefit on the $1 million Roth balance, can easily exceed $180,000 over a 20-year retirement.
The key insight: they paid 12% to 22% in the gap years on money that would otherwise have been taxed at 22% to 24% (or higher) once stacked on top of RMDs and Social Security. And the Roth money never faces RMDs, never gets taxed again, and passes to heirs income-tax-free.
- $1.5M grows untouched in traditional IRA for 11 years
- Account reaches ~$1.9M by age 73
- RMDs of ~$56,600/year push into 24% bracket from day one
- RMDs stack on top of Social Security, triggering IRMAA surcharges
- Heirs inherit taxable traditional IRA
- Convert ~$100,000/year during low-income gap years
- Move $1,000,000 into Roth at a blended ~15% rate over 10 years
- Remaining traditional IRA of ~$500K generates RMDs of only ~$19,000/year at 73
- IRMAA surcharges reduced or avoided entirely
- Heirs inherit Roth IRA -- income-tax-free distributions
If you have ever made non-deductible contributions to a traditional IRA, the pro-rata rule determines how much of your conversion is taxable. You cannot cherry-pick the after-tax dollars. IRC Section 408(d)(2); reported on Form 8606, Part I.
The IRS treats all your traditional, SEP, and SIMPLE IRAs as one pool. The taxable fraction of any conversion equals the ratio of pre-tax dollars to total IRA value, measured on December 31 of the conversion year.
Example: You have $450,000 in a traditional IRA, of which $50,000 is non-deductible contributions (basis). You convert $100,000. The taxable percentage is $400,000 / $450,000 = 88.9%. So $88,900 of your $100,000 conversion is taxable, and $11,100 is tax-free. You cannot convert "just the $50,000 non-deductible part."
The workaround: if you have an employer plan that accepts incoming rollovers, roll your pre-tax IRA money into the 401(k) first. That leaves only the non-deductible IRA contributions behind, which you can then convert to Roth with minimal tax. This is the mechanics behind the "backdoor Roth" strategy. IRS Publication 590-A; Form 8606 instructions.
IRMAA: The Medicare Surcharge Surprise
Roth conversions increase your Modified Adjusted Gross Income (MAGI) in the year of conversion. That MAGI is used two years later to set your Medicare Part B and Part D premiums through the Income-Related Monthly Adjustment Amount (IRMAA). Social Security Act Section 1839(i).
2026 IRMAA brackets, married filing jointly:
| MAGI (from 2024 tax return) | Monthly Part B Premium |
|---|---|
| $218,000 or less | $202.90 |
| $218,001 - $274,000 | $284.10 |
| $274,001 - $342,000 | $405.80 |
| $342,001 - $410,000 | $527.50 |
| $410,001 - $749,999 | $649.20 |
| $750,000+ | $689.90 |
CMS: 2026 Medicare Part B Premiums and Deductibles.
IRMAA operates as a cliff, not a graduated scale. Exceeding the $218,000 threshold by even $1 costs both spouses an extra $81.20 per month each, or $1,948.80 per year for the couple in Part B alone, plus Part D surcharges of $14.50 each per month ($348/year). That is $2,296.80 in additional premiums -- worth factoring into your conversion math.
Conversion strategy: size your annual conversions to stay just below the next IRMAA cliff, measured two years ahead. If you retired in 2024, your 2024 income (including any conversions done that year) determines your 2026 IRMAA. If retirement itself caused a life-changing event, you can file Form SSA-44 to request a recalculation using more current income.
ACA Subsidy Impact for Early Retirees
If you retire before 65 and buy health insurance through the ACA Marketplace, Roth conversions directly increase your household income for purposes of Premium Tax Credit eligibility. This matters enormously in 2026 because the enhanced ACA subsidies have expired and the subsidy cliff has returned. IRC Section 36B. The American Rescue Plan's enhanced subsidies expired at the end of 2025.
The 2026 income limit for ACA subsidies is approximately 400% of the Federal Poverty Level: about $84,600 for a two-person household. Exceed that by $1 and you lose the entire subsidy, which for a couple in their early 60s can easily be $20,000 to $30,000 per year in a high-cost area.
For early retirees between 60 and 65, this creates a direct conflict: you want to do Roth conversions during the low-income gap years, but large conversions can blow your ACA subsidy. The math may favor smaller conversions that keep you below the cliff, or it may favor doing larger conversions and absorbing the premium increase. There is no universal answer -- it depends on your local marketplace premiums, your expected conversion tax rate, and how many years remain until Medicare eligibility at 65.
The Roth Conversion Ladder
The conversion ladder is a specific multi-year strategy primarily used by early retirees (before age 59 1/2) to access retirement funds without the 10% early withdrawal penalty.
Each year, you convert a specific amount from your traditional IRA to your Roth IRA. You pay income tax on the conversion. Then you wait five tax years. After that five-year period, you can withdraw the converted principal (not the earnings) penalty-free, regardless of your age. IRC Section 408A(d)(3)(F). The five-year period begins January 1 of the tax year in which the conversion is made.
The ladder requires planning ahead: you need five years of living expenses funded from other sources (taxable brokerage accounts, cash savings, or earlier Roth contributions that have already satisfied their five-year clock) while your conversion amounts "season." After the ladder is fully established, each year a new tranche of converted money becomes available.
No RMDs on Roth IRAs -- Ever
Traditional IRAs force you to take Required Minimum Distributions starting at age 73 (or 75, depending on birth year). These mandatory withdrawals add to your taxable income whether you need the money or not. They can push you into higher brackets, trigger Social Security taxation, and cause IRMAA surcharges.
Roth IRAs have no lifetime RMDs. IRC Section 408A(c)(5). Starting in 2024, Roth 401(k)s are also exempt from RMDs during the owner's lifetime. SECURE 2.0 Act, Section 325. You can let the money grow untouched for decades, and your heirs inherit it income-tax-free (though they must deplete an inherited Roth IRA within 10 years under the SECURE Act's rules).
This is particularly valuable for widowed individuals. When a spouse dies, the surviving spouse can file as Married Filing Jointly for that final year, but in the following year they switch to Single filing status. The tax brackets for Single filers are roughly half the width of MFJ brackets, meaning the same income is taxed at a higher rate. Reducing the traditional IRA balance through conversions before or shortly after the surviving spouse transitions to Single filing can significantly reduce the "widow's tax penalty." (For more on the tax consequences in the year a spouse passes, see The First Tax Season After Losing a Spouse.)
IRMAA operates as a cliff, not a graduated scale. Exceeding the $218,000 MAGI threshold (MFJ, 2026) by even $1 costs both spouses an extra $81.20/month each in Part B premiums, plus Part D surcharges -- totaling roughly $2,300/year for the couple. Size your annual conversions to stay just below the next IRMAA cliff, measured two years ahead.
Roth conversions are not universally beneficial. Several situations make them counterproductive:
- You are already in the 32%, 35%, or 37% bracket. If your current marginal rate is near or above what you expect in retirement, there is no bracket arbitrage to exploit. Paying 35% now to avoid 24% later is the opposite of a tax strategy.
- You need the money within five years. If you are under 59 1/2, converted amounts withdrawn before the five-year clock expires trigger a 10% early withdrawal penalty. Even after 59 1/2, converting money you need immediately means paying tax now with no time for tax-free growth to compensate.
- You have significant medical expenses or charitable deductions ahead. Large itemized deductions in future years can offset the tax on RMD income, reducing the benefit of having avoided those RMDs through conversion.
- You expect your income to drop dramatically. If a major income reduction is coming (job loss, sabbatical, selling a business at a loss), wait until the low-income year to convert and pay even less tax.
- State taxes make the conversion expensive. Federal tax is only part of the equation. If you live in a high-income-tax state now (California at 13.3%, New York City at up to 12.7% combined) but plan to retire in a state with no income tax (Florida, Texas, Nevada, Tennessee, Wyoming), doing conversions before you move means paying state tax you could have avoided entirely.
Nine states have no income tax: Alaska, Florida, Nevada, New Hampshire (dividends and interest only through 2025, fully exempt starting 2027), South Dakota, Tennessee, Texas, Washington, and Wyoming. Converting while you live in one of these states eliminates the state-tax cost of conversion entirely.
Other states tax Roth conversions as ordinary income. If you plan to relocate in retirement, the sequence matters: convert after you move to the lower-tax state, not before. Some states (like California) assert taxing rights on retirement income earned while you were a resident, even after you leave, though this is generally limited to pension income, not IRA distributions.
For David and Linda in the earlier example, if they currently live in California and plan to move to Nevada at age 65, they should consider delaying larger conversions until after the move. Three years of conversions at a 9.3% California marginal rate on $125,000 adds about $34,875 in avoidable state taxes.
Frequently Asked Questions
Q: Can I undo a Roth conversion if the market drops? A: No. Recharacterization of Roth conversions was permanently eliminated by the Tax Cuts and Jobs Act of 2017, effective for tax years after 2017. IRC Section 408A(d)(6), as amended by TCJA Section 13611. Once you convert, the tax bill is final regardless of what happens to the investment value afterward. This makes conversion timing and amount sizing more important than it was before 2018.
Q: Do I have to convert the entire traditional IRA at once? A: No. You can convert any amount in any year. Partial conversions are the norm for tax bracket management. Most people convert just enough each year to fill up a target bracket (typically the 12% or 22% bracket) without spilling into the next one.
Q: How does a Roth conversion affect my Social Security benefits taxation? A: The conversion amount increases your MAGI in the year of conversion, which can increase the taxable portion of your Social Security benefits from 0% to 50% or 85%. IRC Section 86; IRS Publication 915. For MFJ filers, the thresholds are $32,000 (above which up to 50% of benefits become taxable) and $44,000 (above which up to 85% become taxable). This is another reason to do conversions before you start collecting Social Security when possible.
Q: What happens to my Roth IRA when I die? A: Your surviving spouse can treat the inherited Roth as their own, maintaining the tax-free status with no RMDs. Non-spouse beneficiaries must withdraw the entire balance within 10 years under the SECURE Act's rules, but all withdrawals are income-tax-free as long as the original Roth IRA satisfied its five-year aging requirement. SECURE Act Section 401; IRC Section 408A(d)(3)(E).
Q: Should I pay the conversion tax from the IRA itself or from outside funds? A: Almost always from outside funds. If you convert $100,000 and withhold $22,000 for taxes from the IRA, only $78,000 goes into the Roth. The $22,000 withheld is treated as a distribution, not a conversion. If you are under 59 1/2, that $22,000 also triggers a 10% early withdrawal penalty ($2,200). Paying from a checking or brokerage account puts the full $100,000 into the Roth, where it grows tax-free.