Roth conversions: when they help, and when they do not

Why it is worth running the numbers

There is a deep-seated assumption that the safest path with retirement money is to leave it alone. Don't touch it. Let it grow. Pay the taxes whenever you're forced to.

That instinct is correct for many financial decisions. With a large Traditional IRA or 401(k) it is still worth checking. The reason: every dollar in a pre-tax retirement account is a tax obligation in disguise. You haven't paid the tax yet. The IRS will collect. The only question is at what rate, in which decade, and from whom.

If you do nothing, that tax bill comes due during three of the most expensive moments of your financial life:

• Your RMD years (age 73 or 75 onward). The IRS forces a percentage of your IRA out every single year. The percentage rises with age. By 85 you're being forced to take 6.25% per year; by 90, 8.2%.
• Your surviving spouse's single-filer years. When one spouse dies, the survivor's brackets shrink to half the size, but the income largely stays the same. This is the "widow's penalty."
• Your heirs' peak earning years. Under the SECURE Act, most non-spouse beneficiaries must drain an inherited IRA within 10 years, typically while they're at the highest tax brackets of their own careers.

A Roth conversion is one legal tool that can get ahead of all three. You move dollars from Traditional to Roth at today's rates, when brackets are low, when you're still MFJ, when your spouse is still alive, instead of leaving all of it to be taxed in those three windows. Whether that trade pays depends on the rates on each side, which is what the example below tests.

The three compounding losses from inaction

When we compare doing nothing with a multi-year conversion ladder, the difference comes from three places:

1. Extra lifetime income tax YOU pay

RMDs stack on top of Social Security, pension income, rental income, and any other ordinary income. RMDs start at 73, or at 75 if you were born in 1960 or later (IRS). For a couple who are 65 today with $1.5M in a Traditional IRA growing 6% a year, the account is about $2.69M at 75, and the first RMD is about $109,000 ($2.69M divided by the IRS factor of 24.6). That is forced ordinary income on top of everything else. Converting some of it in your 60s makes those later RMDs smaller.

2. Extra income tax YOUR HEIRS pay

Every dollar still sitting in your Traditional IRA at death gets taxed by your heirs over the next 10 years. If your kids are professionals in their 40s and 50s earning $150K+, that inherited IRA hits their 32% or 35% bracket. A $1M inherited Traditional IRA can mean $320K+ in federal tax alone, plus state, plus IRMAA spikes if they're on Medicare. Your children can run their own numbers in the 10-year rule calculator.

3. Lost tax-free Roth compounding

This is the biggest of the three and the most counterintuitive. When you convert $200K to Roth at age 65, that $200K then grows tax-free for the rest of your life and your heirs' 10-year window. The same $200K left in Traditional gets RMD'd out (triggering tax every year) and shrinks. Over 25-30 years of compounding, the difference between "Roth growing tax-free" and "Traditional being eroded by RMDs" can easily be a multiple of the original conversion amount.

These effects pull against one real cost: the tax you pay up front, and the growth that tax money would have earned if you had kept it invested. RMD cash is not lost either. After tax it can stay invested in a regular account. Once both sides are counted, the gap is much smaller than the tax on RMDs alone suggests.

A real example: $1.5M Traditional IRA, age 65

Consider a married couple, both 65, with $1.5M in a Traditional 401(k), $50K in a small Roth IRA, $400K in a taxable brokerage account, and $58K of expected combined Social Security at full retirement age (67). They plan to age 92. Assume 6% returns and 2.5% inflation.

Here are four paths side by side, using 2026 IRS bracket, RMD and IRMAA rules, California state tax, heirs taxed at 22%, and the same spending on every path. After-tax RMD cash stays invested on every path.

For this couple the modest ladder wins: filling only the 12% bracket leaves the family about $417,000 ahead at 92, roughly 5%. Filling the 22% bracket is about even. Filling the 24% bracket leaves them about $669,000 behind doing nothing, because they paid tax at 24% to avoid tax that would mostly have been paid at lower rates. Change the assumptions and the answer moves: with heirs taxed at 32% instead of 22%, the 12% ladder is about $522,000 ahead.

Notice also: the path with the lowest lifetime tax bill (the 22% fill) is not the path that leaves the most money. Paying less tax in total is not the goal. Ending with more after tax is. That is why it pays to run your own numbers instead of following a rule of thumb.

The four windows when Roth conversions deliver the most value

Not every year is equal. A conversion done at age 65 in a low-income year is worth dramatically more than the same conversion done at age 73 when RMDs are already running. There are four specific windows where the math is strongly in your favor:

The retirement gap (ages 60-73)

After you stop W-2 income but before RMDs start, your taxable income often drops to a once-in-a-lifetime low. For many people this is the cheapest decade to convert.

The pre-Social Security window (ages 60-70)

If you delay Social Security to 70 to maximize the delayed retirement credit (an 8% per year guaranteed boost), the years between retirement and 70 are the absolute floor of your ordinary income. Conversions in these years can often be done in the 12% bracket entirely.

The pre-RMD window (ages 60-73)

Once RMDs start, every conversion is "on top of" forced RMD income. Pre-RMD conversions stack on a much lower baseline, meaning more dollars fit inside lower brackets.

Anytime your own brackets are temporarily low (gap years, business losses, the senior deduction years)

The 2017 Tax Cuts and Jobs Act brackets did not expire after 2025: the 2025 tax law (OBBBA) made all of the brackets and the larger standard deduction permanent, so there is no scheduled rate jump to race. The windows that do close are personal or temporary: the $6,000-per-person senior deduction runs only through tax year 2028, a gap year or business loss lowers your income for one year, and RMDs or the death of a spouse (the widow's penalty) can push you into higher brackets later. Years when your own brackets are known to be low (or about to rise) are conversion opportunities.

The IRMAA cliff: the cost most people miss

Every Roth conversion adds to your MAGI (modified adjusted gross income), and MAGI determines your Medicare Part B and Part D premiums via the IRMAA surcharge. The IRMAA system uses a 2-year lookback: a conversion in 2026 affects your 2028 Medicare premiums.

IRMAA is a cliff, not a slope. In 2026, one dollar over the first threshold adds about $1,150 per person per year (Part B plus Part D), and the top tier costs about $6,900 more than the standard premium. For a Medicare-age couple, that's about $2,300 to $13,900 of extra annual cost, even with a one-dollar overshoot.

This doesn't mean you should avoid conversions during Medicare years. It means you should target the cliffs deliberately. A well-designed conversion ladder either stays under an IRMAA tier or deliberately accepts a known tier in exchange for substantially more bracket-arbitrage benefit. Random conversions that accidentally cross thresholds are the worst of both worlds.

How to design a Roth conversion ladder

A Roth conversion strategy is not "convert as much as possible." It's a multi-year plan that balances four constraints simultaneously: federal tax brackets, state tax brackets, IRMAA tiers, and the time-value of paying tax sooner vs. later. The right plan typically:

• Converts every year for as many pre-RMD years as possible. Each year has its own low-bracket room, and unused room does not carry over.
• Targets a specific bracket ceiling. Pick the ceiling by comparing it with the rate that money would face later, for you, a surviving spouse and your heirs. In the example above the 12% ceiling did best and the 24% ceiling did worse than doing nothing.
• Stays IRMAA-aware after age 63. The Medicare 2-year lookback means conversions starting at age 63 affect premiums at 65. Once on Medicare, the conversion target should explicitly bake in the tier you're willing to occupy.
• Pays the tax from outside the IRA. Always. If you pay the conversion tax with IRA money, that money never enters the Roth and the math collapses. Outside savings (brokerage, money market) should fund the tax.
• Accelerates in the lowest-income years. If you have a year between job and Social Security with $30K of ordinary income, that is a year with a lot of low-bracket room.

The default option in our calculator, "smart auto, fill 22%, IRMAA-aware", implements all four of these rules. It is a starting point, not an answer. The calculator also shows the 12%, 24% and 32% fills next to it so you can see which one ends ahead for your numbers.

Sources: CMS 2026 Medicare premiums (IRMAA tiers); IRS 2026 inflation adjustments (brackets); IRS, senior deduction; IRS Publication 590-B (RMD table). Checked October 10, 2026.

Hans Goldstein, EA

Founder & Executive Director · Retirement Literacy Foundation, a 501(c)(3) non-profit
Admitted to practice before the IRS

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