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March 21, 2026 • 15 minutes
A Roth conversion moves money from a traditional IRA or 401(k) into a Roth IRA. You pay income tax on the amount you convert in the year you do it. After that, the money grows tax-free and comes out tax-free in retirement.
That trade-off is the whole game: pay taxes now, at a rate you know, to avoid taxes later, at a rate you can’t control. Whether that trade makes sense depends on your current bracket, your expected future income, and a few other variables this guide walks through.
Picture $80,000 sitting in a traditional IRA. A conversion moves those funds into a Roth: you report $80,000 as income this year, and pay the tax. Everything that grows from there, and everything you eventually withdraw, is tax-free. The IRS treats it the same as wages, factoring whatever you convert into your taxable income for that year. Pay it once, and the money is done being taxed.
The mechanics are clear enough. What requires thought is timing: how much to convert, in which years, and at what cost.
The distinction between a Roth and a traditional account comes down to when taxes apply.
With a traditional IRA or 401(k), contributions reduce your taxable income now. The money grows without annual taxation. You pay income tax on withdrawals in retirement.
With a Roth IRA, you contribute after-tax dollars. The money grows without annual taxation. Withdrawals in retirement are tax-free, including all the growth.
One difference worth understanding in depth: Roth IRAs have no Required Minimum Distributions. Traditional IRAs and 401(k)s require you to withdraw a set amount annually once you reach age 73 if you were born before 1960, or age 75 if you were born in 1960 or later. Those forced withdrawals are taxed as income and can push you into a higher bracket year after year. A smaller traditional IRA balance means fewer dollars subject to mandatory withdrawal rules.
A Roth conversion makes sense when your current bracket is cheaper than the one you expect to land in once RMDs, Social Security, and other income stack up. Five situations tend to make that math work.
The most common case for converting: you’re in a lower bracket now than you will be when Social Security, RMDs, and other income stack up. This often happens in the early retirement years, after a salary stops but before required distributions begin. Income can dip to a level you may never see again, and a conversion in that window gets taxed at the cheaper rate.
Every dollar left in a traditional IRA becomes a future mandatory withdrawal, taxed whether you need the money or not. The goal is to arrive at RMD age with less in traditional accounts and more in the Roth. Each conversion year shifts that ratio, on your terms, at rates you chose, rather than whatever the IRS schedule demands.
Roth accounts pass to beneficiaries without the immediate income tax that comes with inherited traditional IRAs. Under current rules, most non-spouse beneficiaries must withdraw inherited IRAs within 10 years. If those withdrawals land on top of earned income, they’re taxed at the beneficiary’s rate, which may be high. A conversion during your lifetime shifts that tax liability to you, at a rate you can plan for.
When account values are lower, converting a given number of shares means converting a smaller dollar amount. You pay taxes on the value at the time of conversion, not the eventual recovery. If your portfolio drops 20% and you convert the same shares you’d been considering, you’re paying taxes on less money. All the recovery that follows happens inside the tax-free Roth. It’s one of the more concrete advantages a down market creates for Roth conversion planning, and the window closes the moment prices recover.
There may be room between your current income and the top of your bracket, often more than you’d expect. Converting up to that ceiling without crossing into the next rate is a repeatable annual strategy. See the bracket-filling section below for the math.
A conversion costs money upfront. A few conditions tend to flip the math against it.
You’d have to pay the taxes from the retirement account itself. Every dollar withheld to cover the tax bill is a dollar that never enters the Roth, and that gap compounds for decades. If outside savings aren’t available to cover it, the long-term math usually shifts against converting.
You’re in a high bracket now and expect lower income in retirement. If your income falls in retirement, you may pay less in taxes on traditional IRA withdrawals than you’d pay on a conversion today. The conversion bet only pays off when future rates are higher, not lower.
A large conversion would affect your ACA subsidies or a dependent’s financial aid. A conversion gets added to your AGI for the year. If you’re purchasing health coverage through the Affordable Care Act marketplace, an income spike can reduce or eliminate your subsidy. A conversion in a year when college financial aid is being calculated for a dependent can reduce eligibility as well.
Your traditional 401(k) is with your current employer. Most plans don’t allow in-service conversions. You’d need to separate from the employer or wait for an eligible rollover.
You’re already taking large RMDs and your income is near the top of your bracket. Adding a conversion on top of required minimum distributions can push income into much higher territory. The math can still work, but it requires careful modeling before committing. Keep in mind that you can’t convert an RMD itself. You have to take your mandatory RMD first (and pay taxes on it), and then you can only convert additional funds beyond that amount.
A backdoor Roth IRA is a strategy for high earners who exceed the income limits for direct Roth IRA contributions. In 2026, the ability to contribute to a Roth IRA phases out above $153,000 in modified adjusted gross income for single filers and $242,000 for married couples filing jointly. Above those thresholds, direct contributions aren’t allowed.
The backdoor approach: contribute to a nondeductible traditional IRA (which has no income limit), then convert that traditional IRA to a Roth. Conversions aren’t subject to income restrictions. Anyone can execute one, regardless of earnings. The strategy is legal and widely used.
The complication is the pro-rata rule. If you have existing traditional IRA balances elsewhere, the IRS treats all your traditional IRA funds as a single pool when calculating the taxable portion of a conversion. You can’t convert only the nondeductible contribution and treat it as tax-free while leaving pretax funds untouched. If 80% of your total traditional IRA balance came from pretax contributions and 20% from nondeductible contributions, then 80% of any conversion is taxable, regardless of which specific funds you’re moving.
The pro-rata rule doesn’t apply if you have no other traditional IRA balances. Many people who use the backdoor strategy roll existing traditional IRA funds into a current employer 401(k) first, which takes them out of the IRA pool and clears the pro-rata problem before executing the conversion.
The process itself is procedural. Getting it right means following the steps in order.
Step 1: Open a Roth IRA if you don’t have one. Your current IRA custodian can usually open both accounts at the same institution, which makes transfers cleaner.
Step 2: Decide how much to convert. Your current year income, your bracket, the amount that would push you into the next rate, and any IRMAA exposure all factor in. Don’t guess at this number.
Step 3: Request the transfer from your custodian. You can transfer in-kind (the same securities move from one account to the other) or as cash. An in-kind transfer avoids selling and repurchasing positions and is often cleaner.
Step 4: Set aside money from outside the retirement account to cover the taxes. When you file your return, the converted amount is added to your taxable income. Withholding from the funds you’re moving means less money inside the Roth, which reduces the benefit you’re converting to gain. Pay from a checking or taxable brokerage account if you can.
Step 5: File IRS Form 8606. This form reports nondeductible IRA contributions and conversions. Your custodian will send a 1099-R showing the distribution. Your tax preparer or filing software needs the Form 8606 to calculate the taxable portion correctly. Keep copies. The IRS can question Roth basis years later, and Form 8606 is your documentation.
The most disciplined Roth conversion strategy is bracket-filling: each year, move enough into the Roth to bring your taxable income to the top of your current bracket without crossing into the next rate.
Here’s how it works in practice. Say you’re married filing jointly. Your income this year from Social Security, a small pension, and portfolio withdrawals totals $130,000. The top of the 22% bracket in 2026 is $211,400 for married couples. You have roughly $81,400 of headroom. Converting up to that amount means every converted dollar is taxed at 22% or below. The first dollar into the 24% bracket costs more without delivering more tax-free growth.
Done every year between retirement and the age when RMDs begin, bracket-filling conversions can reduce the traditional IRA balance that generates mandatory distributions, all without triggering the higher rates you were trying to avoid.
Knowing where the boundaries fall matters. The 2026 tax brackets are now permanent under current law, which makes multi-year conversion planning more predictable than it was when those rates were set to expire. A Roth conversion calculator can give you a quick estimate of the tax cost of a given amount. For multi-year strategy, model conversions against your full financial picture.
This is one of the most overlooked costs of a large conversion, and the timing makes it easy to miss.
Medicare Part B and Part D premiums are income-tested through a surcharge called IRMAA (Income-Related Monthly Adjustment Amount). The income used to calculate your IRMAA is your modified adjusted gross income from two years prior.
A Roth conversion in 2026 could increase your Medicare premiums in 2028. The IRMAA surcharge begins at $109,000 for single filers and $218,000 for married couples filing jointly (2026 thresholds based on 2024 MAGI; verify current year figures at CMS.gov). Above those levels, premiums rise in tiers that can add hundreds of dollars per month.
The two-year lookback is what catches people off guard. You do the conversion now. You don’t see the premium impact until you’re on Medicare and the IRMAA notice arrives.
Paying IRMAA for a year or two might still cost less than the taxes you’d avoid on future RMDs. What matters is running both numbers together, not treating the conversion tax and the Medicare impact as separate decisions.
Check the items that match your situation. The first group supports converting. The second argues for waiting.
Conditions that support converting:
Conditions that argue against converting right now:
If most of the first group applies and few of the second do, a conversion is worth modeling in detail. A CERTIFIED FINANCIAL PLANNER® can help you run the full scenario before committing. Boldin Advisors offers one-on-one sessions with CFPs who specialize in retirement tax planning.
Before converting, you need to see the full picture: tax bill this year, projected RMDs without the conversion, estate value with and without, and Medicare exposure. Looking at any one of those in isolation gives you an incomplete answer.
The Boldin Planner includes a Roth Conversion Explorer built for just this kind of comparison. It models conversions against your specific financial situation, including current and projected tax rates, Social Security timing, and projected account balances over time, so you can run multiple conversion amounts across multiple years and compare the impact on after-tax estate value, lifetime taxes, and cash flow side by side.
For a full walkthrough of setting up scenarios, adjusting conversion amounts, and reading the output, see how to model Roth conversion strategies in the Boldin Planner. If you’re already a Boldin user, the Roth Conversion Explorer is inside your planner. If you haven’t built a plan yet, the Boldin Planner is free to start.
A Roth conversion moves money from a pretax retirement account, a traditional IRA or 401(k), into a Roth IRA. The IRS treats the converted amount as taxable income for that year, taxed at your current rate. After that, the account compounds without a tax drag, and distributions in retirement come out clean. There’s no income limit on who can convert.
The converted amount is taxed as ordinary income in the year of conversion, at your marginal rate. Convert $50,000 while you’re in the 22% bracket and you’d owe roughly $11,000 in federal income tax on that amount, though the actual figure depends on your full income picture for the year. Paying the tax from outside savings, rather than from the converted funds, preserves the full amount inside the Roth account and maximizes the long-term benefit.
There’s no annual limit on the amount you can convert from a traditional IRA or 401(k) to a Roth. Roth contribution limits, which cap how much new money you can put in each year, are a separate rule that doesn’t apply to conversions. Most people convert in amounts that fit within their current tax bracket rather than all at once, to avoid an unnecessary tax spike in a single year.
Each Roth conversion starts its own 5-year clock. Withdraw converted funds before five years pass, and before you turn 59.5, and you’ll owe a 10% early withdrawal penalty on that amount. This conversion clock is separate from the 5-year rule that governs tax-free earnings. See our full breakdown of the two Roth 5-year rules for how the two interact.
Medicare Part B and Part D premiums are calculated based on your modified adjusted gross income from two years earlier, through a system called IRMAA. A large Roth conversion this year could increase your Medicare premiums two years from now if it pushes your income above the IRMAA thresholds. For 2026, those thresholds begin at $109,000 for single filers and $218,000 for married couples (based on 2024 MAGI; verify at CMS.gov). Paying an IRMAA surcharge for a year may still be worth it if the tax savings on future RMDs are larger, but the cost needs to be part of your conversion calculation.
A backdoor Roth IRA is a strategy for people whose income is too high to contribute to a Roth IRA directly. You contribute to a nondeductible traditional IRA, which has no income limit, and then convert it to a Roth. Because there’s no income restriction on conversions, high earners can build Roth savings through this path. The main complication is the pro-rata rule: if you have other traditional IRA balances, the IRS calculates the taxable portion of the conversion across all your IRA funds combined, not just the nondeductible amount you contributed.
The best years tend to be those with lower-than-usual income: the window between retirement and Social Security, years when the market is down, or years when you have room inside a lower tax bracket. Conversions done in high-income years cost more and often don’t pay off unless future rates are expected to be much higher. Avoiding large conversions in years when ACA subsidies are in play, or when a dependent’s financial aid is being calculated, is worth factoring into the timing.
The ability to undo a Roth conversion, called recharacterization, was eliminated by the Tax Cuts and Jobs Act of 2017. Once you convert, the conversion is permanent. The tax liability for the year of conversion stands regardless of what happens to the market after you move the money. If you converted $100,000 and the market dropped 30% the following month, you still owe taxes on $100,000. Model carefully before converting.
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