When Should You Do a Roth Conversion?

A Roth conversion typically makes sense in years when your taxable income is unusually low and you have room in a lower tax bracket to absorb the converted amount. For most retirees, the best window is between the year you retire and the year required minimum distributions begin (age 73 for those born 1951-1959, age 75 for those born 1960 or later). Because a conversion is taxable in the year of conversion and interacts with Social Security, IRMAA, and future RMDs, the right amount and timing should be determined through a multi-year tax projection rather than a single-year decision.

Key Takeaways

– Roth conversions have no income limits, per the IRS.
– The window between retirement and age 73 is typically the most valuable conversion window because taxable income is at a lifetime low.
– Required minimum distributions begin at age 73 for those born between 1951 and 1959, and at age 75 starting in 2033 for those born in 1960 or later.
– A conversion that crosses an IRMAA threshold can cost more in Medicare surcharges than it saves in future taxes.
– Roth IRAs have no required minimum distributions during the original owner’s lifetime.

What is a Roth conversion?

A Roth conversion moves money from a traditional IRA or 401(k) into a Roth IRA. The amount converted is included in taxable income in the year of conversion. After conversion, the money grows tax-free and qualified distributions are tax-free in retirement.

The IRS eliminated income limits on Roth conversions in 2010. Any traditional IRA holder can convert regardless of income.

Why do retirees convert before age 73?

Age 73 is when required minimum distributions begin for most retirees under current law. RMDs force taxable income from traditional accounts whether the retiree needs the money or not.

For a retiree with $2 Million in traditional IRAs, the first RMD at age 73 is roughly $75,000. Combined with Social Security and any other income, RMDs often push retirees into higher brackets, trigger IRMAA surcharges, and increase the taxable portion of Social Security.

The years between retirement and 73 are typically the lowest-income years of an adult life. Converting during this window shrinks the traditional balance, which shrinks future RMDs.

When is the best year to do a Roth conversion?

Three situations stand out:
– The first year of retirement before Social Security starts
– Years with one-time deductions (charitable gifts, medical expenses, business losses) – Years before age 73 with room in lower tax brackets.

For 2026, the IRS sets the 22 percent bracket from $24,801 to $211,400 for joint filers, and the 24 percent bracket from $211,401 to $403,550. The cliff between 24 percent and 32 percent at $403,551 is where many conversion plans top out for couples. For households also managing IRMAA, the first IRMAA threshold of $218,000 in 2026 often creates a tighter practical ceiling than the tax bracket itself.

How much should you convert each year?

The optimal amount fills available bracket space without crossing into the next bracket or
an IRMAA threshold.

Example. A couple, both age 65, has $50,000 of taxable income from interest and dividends. They sit in the 12 percent bracket today. The first IRMAA threshold of $218,000 in 2026 leaves $168,000 of conversion room before triggering Medicare surcharges two years later. Converting $165,000 per year for 8 years moves over $1.3 Million from traditional to Roth before RMDs begin, while keeping MAGI just under the first IRMAA tier and filling up the 22
percent bracket.

Do Roth conversions trigger IRMAA?

Yes. The converted amount counts as modified adjusted gross income, which determines IRMAA two years later. A retiree converting $150,000 in 2026 may face higher Medicare premiums in 2028 if the conversion pushes them across an IRMAA threshold.

For 2026, the Centers for Medicare and Medicaid Services sets the first IRMAA threshold at $109,000 for single filers and $218,000 for joint filers. See Link For Blog 4 for the full IRMAA framework.

Should you pay conversion taxes from the IRA or from outside funds?

From outside funds, almost always. Paying conversion taxes from the IRA itself reduces the amount that moves to the Roth and (for those under 59 and a half) creates an additional 10 percent early withdrawal penalty on the tax withholding.

For retirees over 59 and a half, paying from taxable accounts maximizes the Roth balance and the tax-free growth that follows.

When does a Roth conversion not make sense?

Several situations argue against converting:
– The conversion pushes the household into the next IRMAA bracket two years out – Conversion taxes would have to be paid from the IRA itself
– The retiree expects a lower tax bracket in later retirement than today -Significant charitable giving plans suggest qualified charitable distributions from the IRA later will solve the same problem

What is the 5-year rule for Roth conversions?

Each Roth conversion has its own 5-year clock for the converted amount to be withdrawn without a 10 percent penalty for those under 59 and a half. For retirees over 59 and a half, this rule generally does not apply to the converted principal. The rule matters most for early retirees doing conversions in their 50s.

Common Mistakes

1. Converting an amount that crosses an IRMAA bracket without modeling the cost
2. Paying the conversion tax from the IRA itself
3. Converting all in one year instead of spreading across multiple years
4. Failing to coordinate with Social Security claiming
5. Not converting at all when the window is available