A guy named Mike, who’d been a Money Talks Newsletter subscriber for years, emailed me in early 2023. He’d just retired at 64 with a $1.4 million traditional IRA, and his certified public accountant (CPA) had mentioned Roth conversions almost as an afterthought.
“Stacy, my CPA said I should think about converting some of my IRA to a Roth. He said I’d save money on taxes long-term. Then he charged me $300 and didn’t really explain it. What’s a Roth conversion, and is this something I should actually be doing?”
The short answer: Yes, Mike should probably be doing at least partial Roth conversions, and the next several years are likely the best window he’ll ever have. The longer answer is more complicated, which is why most people either ignore Roth conversions entirely or do them badly.
Here’s the basic idea. A Roth conversion moves money from a traditional IRA or 401(k) into a Roth IRA. You pay ordinary income tax on the converted amount in the year you convert. From that point forward, the money grows tax-free, withdrawals in retirement are tax-free, and there are no required minimum distributions (RMDs).
You’re voluntarily paying tax now to avoid (potentially much higher) tax later. That’s the whole game.
So when does it pay off? Here are the six questions to ask before pulling the trigger.
1. Are you in a temporary low-tax window?
The classic Roth conversion sweet spot is the gap between when you stop working and when you start collecting Social Security and required minimum distributions. RMDs now begin at age 73 (rising to 75 for those born in 1960 or later).
If you retire at 62 and don’t claim Social Security until 70, those eight years are likely the lowest-income years you’ll have for the rest of your life. Filling those years with strategic conversions can let you move large chunks of money into a Roth at low tax rates.
Once Social Security and RMDs start, your tax bracket usually goes up — and it stays up. Convert before then, or risk paying a higher rate forever.
2. What’s your current tax bracket vs. your future bracket?
This is the core of the math. Conversions make sense when your current tax rate is lower than your expected future rate.
For a married couple with no other income in 2026, you can convert roughly $133,000 — the standard deduction plus the top of the 12% bracket — at a blended rate around 10%, according to an analysis from Income Lab. That’s an extraordinary deal compared to what most people will pay on RMDs in their 70s and 80s.
If you’re already in the 32% or 35% bracket and expect lower income in retirement, conversions probably don’t pay. If you’re in the 12% or 22% bracket now and expect to be at 24% or higher later, they probably do.
3. Can you pay the tax from outside the IRA?
This is the rule most people miss. The tax bill on a conversion should come from outside money — taxable savings, a brokerage account, anywhere except the IRA itself.
If you convert $100,000 and pull $24,000 out of the IRA to pay the tax, you only got $76,000 into the Roth. You also potentially triggered a 10% early-withdrawal penalty if you’re under 59½. Paying for the conversion from outside the IRA is what makes the math actually work.
If you don’t have the cash to cover the taxes, either don’t convert or convert a smaller amount that you can afford to pay tax on.
4. Watch out for IRMAA
Here’s the trap nobody warned Mike about. If you’re 63 or older, a Roth conversion increases your modified adjusted gross income (MAGI), and Medicare uses that MAGI from two years prior to determine your Part B and Part D premiums.
Cross an income-related monthly adjustment amount, or IRMAA, threshold by even one dollar, and you owe surcharges that can run thousands per year per person. According to Income Lab’s analysis, the 2026 thresholds are $109,000 for single filers and $218,000 for joint filers, with the next surcharge tier triggering at $137,000 single and $274,000 joint.
So a $50,000 conversion that pushes a couple’s MAGI from $217,000 to $267,000 triggers a year of higher Medicare premiums. The conversion still might be worth it — but you have to model it.
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5. Don’t ignore your state taxes and the ACA
Here are two more variables most people overlook.
State taxes can change the math significantly. Converting in California (top rate 13.3%) is materially worse than converting in Texas or Florida (no state income tax). If you’re planning a move to a no-tax state, doing conversions after the move can save thousands.
If you’re under 65 and on an Affordable Care Act (ACA) marketplace health plan, conversion income counts toward the MAGI that determines your subsidy. A conversion that bumps you over the subsidy cliff can cost more in lost premium tax credits than it saves in long-term tax.
As this guide on Roth conversions notes, this kind of cross-impact has to be modeled, not assumed.
6. Think about what you’re leaving behind
If you have heirs and want to leave them a tax-friendly inheritance, Roth IRAs are a gift. Beneficiaries don’t pay income tax on Roth withdrawals (though the Secure Act now requires non-spouse beneficiaries to fully drain inherited IRAs within 10 years).
Heirs who inherit a traditional IRA, on the other hand, owe ordinary income tax on every dollar — and that comes during what are often their peak earning years.
If your goal is to move wealth efficiently to the next generation, paying tax now in a low bracket is often dramatically better than letting your kids pay tax later in a high bracket.
The boring truth about Roth conversions: They’re rarely a single decision. They’re a multi-year strategy. The right move is usually to convert in chunks each year, filling up bracket space without crossing IRMAA thresholds, until your traditional IRA balance is at a level that won’t generate massive RMDs later.
There’s also a five-year rule on conversions you should know about, which is covered in “Understanding These Roth Rules Is Essential for an Early Retirement.”
Mike, by the way, did exactly what I suggested. He’s been converting about $90,000 a year since he retired, staying just under the IRMAA threshold for joint filers. By the time he hits 73 and RMDs kick in, he’ll have moved roughly $700,000 into his Roth — and his future RMDs (and his widow’s tax bill, if she outlives him) will be a fraction of what they would’ve been.
Was it worth $300 in CPA time? Yeah, it was. Worth doing on autopilot without thinking? Absolutely not.
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