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.
Whether converting pays off depends on your bracket today, your income later, and a few side effects. For many people, the cheapest years to convert arrive right after work ends, and they don’t last long.
How Does a Roth Conversion Work?
Picture $80,000 in a traditional IRA. Converting it to a Roth adds $80,000 to your taxable income for the year, the same as wages would. You pay that tax once. Everything the money earns afterward, and everything you withdraw in retirement, can come out tax-free.
A conversion counts in the year it’s completed, so the deadline for a 2026 conversion is December 31. Anyone can convert, with no income limit and no cap on the amount. The harder questions are how much to convert and when.
A conversion also can’t be undone. The Tax Cuts and Jobs Act ended recharacterizations for conversions made after 2017.
How Is a Roth IRA Taxed Differently Than a Traditional IRA?
The difference is when you pay tax. Traditional IRA and 401(k) contributions lower your taxable income now, and withdrawals are taxed as ordinary income later. Roth contributions go in after tax, and qualified withdrawals, growth included, come out tax-free:
| Feature | Traditional IRA or 401(k) | Roth IRA |
|---|---|---|
| Contributions | Pretax or deductible | After-tax |
| Growth | Tax-deferred | Tax-free |
| Withdrawals in retirement | Taxed as ordinary income | Tax-free if qualified |
| Income limit to contribute | None | Phases out above $153,000 single or $242,000 joint (2026) |
| Required minimum distributions | Yes, starting at 73 or 75 | None for the original owner |
| Early withdrawals | Taxable, plus a 10% additional tax under 59½ | Contributions anytime; converted amounts within five years and under 59½ owe a 10% additional tax |
| What heirs receive | Taxable withdrawals | Tax-free withdrawals |
Source: IRS, Roth IRAs and IR-2025-111 for 2026 income limits.
No required minimum distributions is one of the biggest differences. RMDs start at 73 for people born 1951 through 1959 and at 75 for those born in 1960 or later. They’re taxed as income whether you need the money or not, and they can push you up a bracket year after year. Every dollar you convert stops feeding them.
Roth IRAs also have two separate five-year rules, one for each conversion and one for earnings.
When Does a Roth Conversion Make Sense?
A Roth conversion makes sense when your tax rate now is lower than the rate you expect to pay later. Six situations tend to make that true.
1. Your income is lower now than it will be later
This often happens in early retirement, after the paychecks stop and before Social Security and RMDs begin. Income can dip to a level you may not see again, and conversions in that window get taxed at the lower rate.
2. Your deductions have room left
In a low-income year, your standard deduction can cover part of a conversion. A married couple under 65 with no other income can convert $32,200 in 2026 with no federal income tax.
3. You want smaller RMDs later
Every dollar left in a traditional IRA becomes a future required withdrawal. Converting over several years lets you reach RMD age with less in traditional accounts, on your schedule and at rates you chose.
4. You’re leaving money to heirs
Most non-spouse beneficiaries must empty an inherited IRA within 10 years. Those withdrawals stack on top of the heir’s own earnings and get taxed at their rate, which may be higher than yours. Converting during your lifetime moves that tax to you, at a rate you can plan for.
5. Your portfolio is down
A price drop lets you convert the same shares for less taxable income. If your IRA falls 20%, converting the same holdings adds 20% less to your taxable income, and the recovery happens inside the Roth. Converting in a downturn carries its own risk, since prices can keep falling after you convert.
6. You have room left in your bracket
The gap between your income and the top of your bracket is often bigger than people expect. Filling it each year without crossing into the next rate is a repeatable strategy, shown in the bracket-filling table below.
When Should You Not Do a Roth Conversion?
A conversion costs money up front, and some situations tip the math against it:
- You’d pay the tax from the IRA itself. Money withheld for taxes doesn’t reach the Roth. If you’re under 59½, the withheld amount can also owe the 10% additional tax.
- Your rate now is higher than it will be later. If your income drops in retirement, you may pay less tax on future withdrawals than on a conversion today.
- You rely on ACA premium credits. A conversion raises the income that sets Marketplace subsidies. In 2026, credits stop above 400% of the poverty line, a big cost for early retirees buying their own coverage.
- A child is applying for financial aid. Conversion income counts in the income that college aid formulas use.
- You’re already in a high bracket from RMDs. Adding a conversion on top can push income into much higher brackets and toward the 3.8% net investment income tax threshold.
How Much Should You Convert?
A common approach is to fill your current bracket each year without crossing into the next one. Say a married couple has $130,000 of taxable income from Social Security, a pension, and withdrawals. The 22% bracket runs to $211,400 in 2026 and $218,250 in 2027, so they have $81,400 of room this year and $88,250 next year:
| Taxable Income Before Converting (Joint) | Room Left in 22%, 2026 | Room Left in 22%, 2027 |
|---|---|---|
| $130,000 | $81,400 | $88,250 |
| $160,000 | $51,400 | $58,250 |
| $185,000 | $26,400 | $33,250 |
Source: Boldin calculations from IRS Rev. Proc. 2025-32 and Rev. Proc. 2026-35.
Other income fills the bracket first, including long-term capital gains, which stack on top of ordinary income. Repeated every year between retirement and RMD age, bracket-filling shrinks the balance that will generate RMDs without pushing any dollar into a higher rate.
The 2026 brackets are now permanent under current law, which makes a multi-year plan easier to map. Boldin’s free Roth conversion calculator estimates the federal tax on a single conversion.
How Does a Roth Conversion Affect Medicare Premiums?
A conversion can raise your Medicare Part B and Part D premiums two years later. Medicare’s IRMAA surcharges use modified adjusted gross income from two years earlier, so a 2026 conversion shows up in 2028 premiums.
For 2026, surcharges start above $109,000 of 2024 income for single filers. For joint filers, the line is $218,000. Above those levels, premiums rise in tiers that can add hundreds of dollars a month.
Paying a surcharge for a year can still cost less than the tax you’d save on future RMDs. Run both numbers together before you convert.
How Do You Do a Roth Conversion?
Most custodians handle a conversion online or with a short form. The steps:
- Open a Roth IRA if you don’t have one, often at the same custodian as your traditional IRA.
- Decide how much to convert based on your income, your bracket, and your Medicare surcharge exposure.
- Request the conversion by December 31. You can move shares in kind or convert cash.
- Pay the tax from outside the IRA, through an estimated payment or extra withholding from a pension or paycheck.
- Report it. File Form 8606 with your return. Your custodian sends a 1099-R for the conversion. Keep copies, since Form 8606 tracks any after-tax basis for years to come.
What Is an In-Plan Roth Conversion?
An in-plan Roth conversion moves pretax money in a 401(k), 403(b), or governmental 457(b) to the Roth side of the same plan. It’s taxed like an IRA conversion, as ordinary income in the year you convert. You can do it while you’re still working, if your plan offers it.
Since 2013, plans can let you convert any vested pretax balance, including money you couldn’t otherwise withdraw yet. An in-plan conversion has no mandatory 20% withholding, so set aside cash for the tax. Roth 401(k) accounts have had no required minimum distributions during the owner’s lifetime since 2024.
Ask your plan administrator whether in-plan conversions are allowed and how often. If they aren’t, a conversion waits until you can roll the money into an IRA.
What Is a Backdoor Roth IRA?
A backdoor Roth IRA lets high earners fund a Roth when their income is above the limit for direct contributions. In 2026, eligibility phases out between $153,000 and $168,000 of modified AGI for single filers. For joint filers, the range is $242,000 to $252,000.
You contribute to a nondeductible traditional IRA, which has no income limit, then convert it to a Roth. Conversions have no income limit either, so the money ends up in the Roth.
The catch is the pro-rata rule. The IRS adds up all your traditional, SEP, and SIMPLE IRA balances at year-end and treats each conversion as a slice of that total. If 80% of the total is pretax, 80% of any conversion is taxable.
Rolling pretax IRA money into a current employer’s 401(k) before converting takes it out of that total, if the plan accepts rollovers.
Is a Roth Conversion Right for You?
If most of the left column fits and little of the right does, a conversion deserves a closer look:
| Signs It May Pay Off | Signs to Wait |
|---|---|
| Your income is lower now than you expect later | You’d pay the tax from the IRA itself |
| You won’t need the money for at least 10 years | You’re getting ACA premium credits this year |
| You have savings outside the IRA for the tax | A conversion would push you into a higher bracket |
| RMDs and Social Security will raise your income later | Your 401(k) is with your employer and the plan has no in-plan option |
| You want smaller RMDs | You’re already in a high bracket from RMDs |
| You plan to leave savings to heirs | A child is applying for financial aid |
How Can You Model a Roth Conversion?
Model a conversion against your whole plan, since it touches this year’s tax bill, future RMDs, Medicare premiums, and what you leave to heirs.
The Roth Conversion Explorer in the Boldin Planner models conversions against your own plan, including projected tax rates, Social Security timing, and account balances. You can compare conversion amounts across several years and see the effect on lifetime taxes, cash flow, and after-tax estate value.
If you’d rather work through it with someone, Boldin Advisors offers one-on-one sessions with CFP® professionals who specialize in retirement tax planning.
Roth Conversion FAQ
What is the 5-year rule for Roth conversions?
Each Roth conversion starts its own five-year clock on January 1 of the year you convert. If you withdraw converted money before that clock runs out and before 59½, you owe a 10% additional tax on it. A separate five-year rule decides when Roth earnings come out tax-free.
Can I undo a Roth conversion?
A Roth conversion is permanent. Recharacterization, which once let people reverse a conversion, ended for conversions made after 2017. If you convert $100,000 and the account drops 30% the next month, you still owe tax on $100,000. Converting in smaller pieces limits that risk.
How much tax will I pay on a $50,000 Roth conversion?
A $50,000 Roth conversion is taxed at your ordinary income rates. If all of it lands in the 22% bracket, the federal tax is $11,000. If it spans two brackets, each part is taxed at its own rate. State income tax, where it applies, comes on top.
Is there a limit on how much I can convert to a Roth?
Roth conversions have no annual dollar limit and no income limit. You can convert any amount from a traditional IRA. A 401(k) works too, if the plan allows in-plan conversions or once you roll the money out. The practical limit is the tax bill, which is why many people spread conversions over several years.
How is a conversion taxed if my IRA has after-tax money?
A Roth conversion from an IRA holding after-tax money is partly tax-free. The pro-rata rule spreads your after-tax basis across all your traditional, SEP, and SIMPLE IRAs, so each conversion carries the same tax-free share. Form 8606 tracks that basis from one year to the next.
Can I convert an inherited IRA to a Roth?
A non-spouse beneficiary can’t convert an inherited IRA to a Roth. A surviving spouse can treat an inherited IRA as their own and then convert it like any other traditional IRA. Inherited 401(k) money follows other rules: a non-spouse beneficiary can move it straight into an inherited Roth IRA and pay tax on the amount.
Can I convert my RMD to a Roth?
A required minimum distribution can’t be converted to a Roth. In any year you owe an RMD, you have to take the full amount first and pay tax on it. Only money withdrawn beyond the RMD can be converted, which is one reason conversions cost less in the years before RMDs start.
