Roth Conversion Strategy: When to Convert and How Much (2026 Guide)

What Is a Roth Conversion?

A Roth conversion moves money from a Traditional IRA or eligible employer plan (such as a 401(k)) into a Roth IRA. You pay ordinary income tax on the converted amount in the year of conversion, but the money then grows tax-free and qualified withdrawals in retirement are also tax-free.

How Roth Conversions Work

1. Choose the amount. There is no maximum conversion limit and no income restriction. You can convert $1,000 or $1,000,000.
2. Pay income tax. The converted amount is added to your ordinary income for the tax year. You owe federal income tax at your marginal rate plus applicable state tax.
3. Money moves to a Roth IRA. Once converted, all future growth and qualified withdrawals are tax-free.
4. No 10% early withdrawal penalty on conversions. Unlike early IRA distributions, converting itself does not trigger the 10% penalty regardless of your age.

Why Convert to a Roth IRA?

• Tax-free growth and withdrawals: Qualified Roth IRA distributions are completely tax-free, including all investment gains
• No Required Minimum Distributions: Roth IRAs have no RMDs during the original owner's lifetime under SECURE 2.0, unlike Traditional IRAs that require distributions starting at age 73
• Tax diversification: Having both pre-tax and Roth funds gives you flexibility to manage your tax bracket in retirement
• Estate planning benefits: Roth IRAs can pass to heirs tax-free (though beneficiaries must distribute within 10 years under SECURE Act rules)

For a detailed comparison of Roth and Traditional IRA account features, see our Roth IRA vs Traditional IRA 2026 guide.

When Is the Best Time to Do a Roth Conversion?

Timing is the most important factor in a Roth conversion strategy. The goal is to convert when your tax rate is lower than what you expect to pay in retirement. Three windows stand out.

1. Low-Income Years (Tax Bracket Window)

Any year your taxable income drops below your long-term average creates a conversion opportunity. Common triggers include:

• Job loss, sabbatical, or career transition
• Early retirement before pensions or Social Security begin
• Years with large itemized deductions (medical expenses, charitable giving)
• Starting a business with initial-year losses

During these years, you can fill the lower 2026 tax brackets with conversion income at a discount compared to your typical rate.

2. Before RMDs Begin (Age 73 Under SECURE 2.0)

Required Minimum Distributions from Traditional IRAs begin at age 73 under SECURE 2.0 (rising to age 75 starting in 2033). Once RMDs start, they add to your taxable income every year whether you need the money or not. Converting before age 73 accomplishes two things:

• Reduces your Traditional IRA balance, which directly lowers future RMDs
• Moves money to an account with no RMDs, giving you full control over taxable distributions

The "gap years" between retirement and age 73, when earned income has stopped but RMDs and Social Security have not yet begun, are typically the most tax-efficient conversion window. Learn more about RMD planning with our RMD Calculator.

3. After Market Downturns

When markets decline, your Traditional IRA balance drops temporarily. Converting during a downturn means you pay tax on a smaller amount, and the subsequent recovery happens inside the Roth IRA -- completely tax-free. Since Roth conversions cannot be undone (recharacterization was eliminated after 2017), this strategy works best when you have conviction that markets will eventually recover.

How Much Should You Convert? (Bracket-Filling Strategy)

The most effective approach is bracket filling: converting exactly enough each year to fill your current tax bracket without jumping to the next one. This keeps your marginal tax rate as low as possible across multiple years of conversions.

How Bracket Filling Works

Start with your taxable income (gross income minus the standard deduction and any above-the-line deductions). The difference between your current taxable income and the top of your bracket is your "conversion room."

Standard deductions: Single $15,350, MFJ $30,700. Bracket thresholds from 2026 federal tax brackets per IRS Rev. Proc. Conversion room = bracket ceiling minus taxable income.

Multi-Year Conversion Planning

For large Traditional IRA balances, a multi-year bracket-filling strategy almost always beats converting everything at once. Consider a married couple (MFJ) with $50,000 in pension income and a $400,000 Traditional IRA:

MFJ couple, $50,000 pension income, $30,700 standard deduction = $19,300 taxable income before conversion. 12% bracket room: $94,300 - $19,300 = $75,000. Estimates do not include state tax. Actual results depend on individual circumstances.

The bracket-filling approach at 12% saves approximately $60,200 in federal taxes compared to a lump-sum conversion. The trade-off is time: it takes 5-6 years instead of one.

Factors That Affect Your Conversion Amount

• Current and expected future tax bracket: Convert if today's rate is lower than your expected retirement rate
• Time horizon: Longer time horizons give the Roth more years of tax-free growth to offset the upfront tax cost
• Medicare IRMAA thresholds: Conversion income can trigger higher Medicare premiums two years later
• State income tax: Factor in your state rate. Some retirees convert after moving to a no-income-tax state
• Available funds to pay the tax: Paying from outside the IRA preserves the full conversion for tax-free growth

Tax Impact of a Roth Conversion

The converted amount is treated as ordinary income for federal and state tax purposes. Understanding the full cost -- including hidden costs -- is essential before converting.

What Taxes You Owe on a Conversion

When you convert, the IRS adds the conversion amount to your other income for the year. You owe:

• Federal income tax at your marginal rate (10% to 37%)
• State income tax at your state's rate (0% to 13.3% depending on state)
• Net Investment Income Tax (NIIT) of 3.8% if the conversion pushes your MAGI above $200,000 (single) or $250,000 (MFJ) and you have net investment income

Note that Roth conversions do not trigger FICA taxes (Social Security or Medicare payroll taxes). The conversion is not considered earned income.

Pay Taxes from Outside Funds

If you use part of the converted amount to pay the tax bill, you reduce the money that grows tax-free in the Roth. For example, converting $100,000 and using $25,000 of it for taxes means only $75,000 compounds tax-free. If you pay the $25,000 from a taxable brokerage account or savings instead, the full $100,000 works for you inside the Roth.

For retirees under 59 1/2, using conversion funds to pay taxes is even worse: the portion used to pay taxes may be treated as a distribution subject to the 10% early withdrawal penalty.

IRMAA and Other Hidden Costs

A Roth conversion increases your Modified Adjusted Gross Income (MAGI), which can trigger additional costs beyond income tax:

IRMAA thresholds from CMS. Social Security thresholds from SSA. ACA subsidy thresholds vary by year and household size. NIIT thresholds from IRC Section 1411.

Roth Conversions and Required Minimum Distributions

The interaction between Roth conversions and RMDs is one of the most compelling reasons to have a conversion strategy. Understanding this connection can save tens of thousands of dollars over a retirement.

How Conversions Reduce RMDs

Your RMD is calculated by dividing your Traditional IRA balance (as of December 31 of the prior year) by an IRS life expectancy factor. Every dollar you convert to Roth is a dollar that no longer generates a mandatory taxable distribution.

RMD calculation uses IRS Uniform Lifetime Table factor of 26.5 at age 73 (SECURE 2.0). Tax assumes 22% marginal federal rate. Actual RMDs grow as a percentage of the balance each year.

Roth IRAs Have No RMDs

Under SECURE 2.0, Roth IRAs have no Required Minimum Distributions during the original owner's lifetime. This means:

• You choose when and how much to withdraw -- or whether to withdraw at all
• The entire balance can continue growing tax-free for decades
• You avoid the "RMD tax torpedo" where forced distributions push you into a higher bracket
• Money you do not need can pass to heirs tax-free (though beneficiaries must distribute within 10 years)

For a deeper look at retirement savings benchmarks and withdrawal strategies, see our 401(k) by age benchmarks guide.

The 5-Year Rule and Other Roth Conversion Rules

5-Year Rule for Converted Amounts

Each Roth conversion starts its own 5-year holding period. If you withdraw converted funds before 5 years have passed AND you are under age 59 1/2, you may owe a 10% early withdrawal penalty. The clock starts on January 1 of the conversion year, regardless of when during the year you converted.

Once you reach age 59 1/2, this rule no longer applies. You can withdraw any converted amount immediately without penalty.

Conversions Cannot Be Undone

The Tax Cuts and Jobs Act of 2017 permanently eliminated recharacterization of Roth conversions, effective January 1, 2018. Once you convert, the decision is irreversible -- you owe taxes on the converted amount regardless of subsequent market performance. This makes careful planning before converting especially important.

The Pro-Rata Rule

If you have both pre-tax and after-tax (non-deductible) contributions in your Traditional IRAs, the IRS treats all your Traditional IRAs as one combined pool. You cannot selectively convert only after-tax dollars. The taxable percentage of any conversion is calculated across all Traditional IRA balances (including SEP and SIMPLE IRAs). This affects "backdoor Roth" conversions if you have existing pre-tax IRA balances.

For more on the differences between IRA and 401(k) accounts and how rollovers work, see our IRA vs 401(k) comparison.

Frequently Asked Questions

Key Takeaways

1. Fill the bracket, do not jump it. Convert up to the top of your current tax bracket each year. A married couple (MFJ) in the 12% bracket can convert up to $94,300 minus their existing taxable income -- potentially saving tens of thousands compared to a lump-sum conversion.
2. The best window is before age 73. Early retirement years before RMDs and Social Security begin offer the lowest tax rates on conversions. Every dollar converted reduces future mandatory taxable distributions.
3. Pay taxes from outside funds. Using non-retirement money for the tax bill preserves the full conversion amount for tax-free growth. Using IRA funds to pay taxes reduces the long-term benefit.
4. Account for hidden costs. IRMAA surcharges, Social Security taxation, ACA subsidy loss, and NIIT can add thousands to your effective conversion cost. Run the full calculation before converting.
5. Conversions are permanent. Since the Tax Cuts and Jobs Act eliminated recharacterization in 2017, every conversion is final. Run the numbers carefully and consult a tax professional for large conversions.

Sources

• IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs) (opens in new tab)
• IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs) (opens in new tab)
• IRS Tax Inflation Adjustments for Tax Year 2026 (opens in new tab)
• H.R.1 "One Big Beautiful Bill Act" Full Text (Congress.gov) (opens in new tab)
• IRS Form 8606: Nondeductible IRAs (Pro-Rata Rule) (opens in new tab)
• Medicare.gov: Medicare Costs and IRMAA Information (opens in new tab)
• SSA: Income Taxes and Your Social Security Benefits (opens in new tab)