Retirement tax strategy
Roth Conversions: The Complete Guide
A Roth conversion means paying income tax on retirement money now so you never pay tax on it again. Done in the right years, it can save a retiree tens of thousands of dollars. Done in the wrong years, it just hands the IRS money early for no reason.
Updated September 2026 · 8 min read
The short version
- What: move money from a traditional IRA/401(k) into a Roth IRA, paying ordinary income tax on the converted amount this year.
- Why: Roth money grows tax-free, has no required minimum distributions, and won't push you into higher brackets later.
- When: the sweet spot is usually the low-income "gap years" between retirement and age 73–75, when RMDs and Social Security begin.
- How much: convert up to the top of your current tax bracket — but watch IRMAA thresholds and ACA subsidy cliffs.
How a Roth conversion works
You transfer some or all of a traditional IRA (or an old 401(k) you've rolled over) into a Roth IRA. The converted amount counts as ordinary income on this year's tax return. After that, the money grows tax-free, and qualified withdrawals in retirement are tax-free too.
There's no limit on how much you can convert in a year, and unlike Roth contributions, conversions have no income limit. Anyone can do one.
Why convert? The core tradeoff
Every dollar in a traditional IRA is a partnership with the IRS: they own a percentage of it, and that percentage is whatever your tax rate is in the year you withdraw. A conversion lets you buy out the IRS's share now, at today's known rate, instead of paying at an unknown future rate.
Converting wins when your tax rate today is lower than the rate you'd pay later. That happens most often when:
- You retire early and have years of low taxable income before RMDs begin.
- A large traditional balance means future RMDs will shove you into a higher bracket.
- You want to leave tax-free money to heirs (who now must empty inherited IRAs within 10 years).
- You want to reduce future IRMAA surcharges, which are driven by your MAGI.
The gap years: your conversion window
For many early retirees, there's a golden window: retired, living off taxable savings, not yet taking Social Security, and not yet subject to RMDs (age 73 or 75 under SECURE 2.0). Taxable income in those years can be strikingly low — which means you can "fill up" the 10% and 12% federal brackets with Roth conversions at a discount compared to the 22–24%+ rates your RMDs might face later.
What can go wrong
IRMAA: the Medicare surcharge cliff
Once you turn 63, your modified adjusted gross income determines your Medicare Part B and D premiums two years later. Crossing an IRMAA threshold by even $1 can cost a married couple thousands per year in extra premiums. Big conversions at 63+ need to be weighed against two years of surcharges.
ACA premium subsidies
If you buy health insurance on the ACA exchange before Medicare, subsidies phase out with income — and since 2026 the 400% federal poverty level cliff is back, meaning one dollar over can wipe out the entire subsidy. A Roth conversion that costs you $8,000 in subsidies to save $5,000 in future taxes is a bad trade.
Paying the tax from the IRA itself
If you're under 59½ and withhold the conversion tax from the converted amount, the withheld portion counts as an early distribution — income tax plus a 10% penalty. Pay the tax from taxable savings instead.
The five-year rules
Each conversion has its own five-year clock for penalty-free access to the converted principal if you're under 59½. After 59½ and with any Roth account open five years, withdrawals are fully qualified.
How much should you convert each year?
There's no single answer, but the framework is:
- Project your income at 73–75 — RMDs (roughly your traditional balance ÷ 27 at 73, shrinking each year), Social Security, pensions.
- Find your future marginal bracket from that projection.
- Convert now at any rate below that future rate, stopping before IRMAA or ACA cliffs unless the math still wins.
- Revisit every year — markets move, brackets index for inflation, and Congress changes rules.
This is exactly the kind of multi-year, tax-aware optimization that's painful in a spreadsheet. NestCalc's Roth conversion optimizer models year-by-year conversions against your brackets, RMDs, IRMAA, and ACA subsidies to find the conversion schedule that maximizes after-tax spending power.
Find your conversion sweet spot
Run your numbers through 1,000 market scenarios with taxes, RMDs, IRMAA, and Roth conversions modeled year by year.
Run the free calculator →Frequently asked questions
Is there an income limit for Roth conversions?
No. Unlike Roth contributions, anyone can convert any amount regardless of income. (Backdoor Roth contributions are a separate maneuver for high earners shut out of direct Roth IRA contributions.)
Can I undo a Roth conversion if the market drops?
No — recharacterization of conversions was eliminated in 2018. A conversion is final, so consider converting in smaller tranches through the year rather than one lump sum.
Do Roth conversions count toward IRMAA?
Yes. Converted amounts are part of your MAGI, which is what IRMAA surcharges are based on (with a two-year lookback). Plan conversions at 63+ carefully.
Should I convert if I plan to leave my IRA to charity?
Probably not — money left to charity via qualified charitable distributions (QCDs) after 70½ was never going to be taxed anyway. Convert the money your heirs will actually inherit.
What about state taxes on conversions?
Conversions are taxed by most states as ordinary income. If you live in a no-income-tax state (like Washington, Texas, or Florida) and might move to a high-tax state later, converting while you're in the no-tax state is especially valuable.