Roth Conversions – When and How Much

Category: Tax Planning for Seniors | FinSeniors, Worthune.com

If you have money in a traditional IRA or 401(k), every dollar sitting there represents a future tax bill. The government gave you a deduction when you contributed (or let earnings grow tax-deferred), and it will want its share when you withdraw. Required Minimum Distributions will force those withdrawals whether you need the money or not.

A Roth conversion — moving money from a traditional IRA to a Roth IRA — is a strategy to pay that tax bill now, on your terms, rather than later when you may have less control over the timing. Done strategically, it can reduce your lifetime tax burden, lower your future RMDs, protect you from rising tax rates, and leave tax-free assets for your heirs. Done carelessly, it can push you into a higher bracket, trigger Medicare surcharges, and accelerate taxes unnecessarily.

This guide helps you understand the mechanics, identify the right windows for conversions, and size them appropriately.

The mechanics are simple. You instruct your IRA custodian to transfer a specified dollar amount from your traditional IRA to a Roth IRA. The converted amount is added to your taxable income for the year. You pay income tax on it at your current rate. Going forward, the money in the Roth grows tax-free, and qualified withdrawals are completely tax-free — with no RMDs during your lifetime.

You can convert any amount — there's no annual limit. But the amount you convert is fully taxable, so the size of the conversion needs to be calibrated to your tax situation carefully.

Managing Future RMDs

Required Minimum Distributions begin at age 73 (or 75 if you were born in 1960 or later). The larger your traditional IRA balance at that point, the larger your RMDs — and the more income tax you'll owe, year after year, whether you need the money or not. Large RMDs can push you into higher brackets, increase the taxability of your Social Security, and trigger Medicare IRMAA surcharges.

Converting portions of your traditional IRA to Roth before RMDs begin reduces the balance subject to RMDs — permanently. Smaller RMDs mean more control over your taxable income in later retirement.

The Tax Rate Bet

A Roth conversion makes intuitive sense when you believe your future tax rate will be higher than your current rate. If you're in a lower-income window now — early retirement, before Social Security begins, before RMDs kick in — and you expect tax rates to rise over time (either for you personally or for everyone due to legislative changes), converting at today's lower rate locks in a better deal.

Tax-Free Inheritance

Roth IRAs pass to heirs income-tax-free. Under the SECURE Act's 10-year rule, most non-spouse beneficiaries must deplete inherited IRAs within 10 years — and with a traditional IRA, they pay income tax on every dollar withdrawn. A Roth IRA inherited under the same rules is withdrawn tax-free. If leaving tax-efficient assets to your heirs is a goal, Roth conversions are a direct path.

The ideal time for Roth conversions is a period when your taxable income is lower than normal — creating space in a lower bracket to convert without crossing into a higher one. Common windows include:

Early Retirement, Before Social Security

If you retire at 62–65 but delay Social Security until 67–70, you may have several years with relatively low taxable income — only IRA withdrawals, investment income, or pension income without the full weight of Social Security. This is often the most attractive conversion window.

Before RMDs Begin

From retirement until age 73 (or 75), you have discretion over how much you take from your traditional IRA. Converting systematically during these years fills your lower tax brackets intentionally rather than being forced into large distributions later.

After a Year of Low Income

A year with unusually low income — due to high medical deductions, business losses, or other factors — may provide extra room in lower brackets for a conversion.

The most common and practical approach is to convert just enough to fill your current tax bracket without crossing into the next one. Here's how to think through it:

• Estimate your taxable income for the year from all sources except the conversion

• Identify the top of your current tax bracket (e.g., the 22% bracket tops out at $103,350 for single filers in 2026)

• Calculate the gap: top of bracket minus your current taxable income

• Convert up to that gap amount — you pay tax at 22% on the converted funds, but the next dollar would be taxed at 24%

• Repeat each year during your conversion window

IRMAA (Medicare Premium Surcharges)

Medicare Part B and Part D premiums are based on your income from two years prior. A large Roth conversion can push you above an IRMAA threshold and significantly increase your Medicare premiums — not just for one year, but potentially for multiple years if the income spike carries through. Factor IRMAA thresholds into your conversion sizing.

Social Security Taxability

A Roth conversion adds to your adjusted gross income, which feeds into the combined income calculation for Social Security taxability. A conversion that pushes you from 50% to 85% SS taxability effectively adds extra tax on your Social Security benefit, reducing the efficiency of the conversion.

Net Investment Income Tax

Conversion income counts toward the NIIT threshold ($200,000 single / $250,000 MFJ). If a conversion would push you above this threshold, the additional 3.8% NIIT on investment income raises your effective rate.

State Taxes

Most states tax Roth conversions as ordinary income. Some states have generous exclusions for retirement income — check your state's rules before sizing a conversion.

Always plan to pay the tax on a Roth conversion with funds outside your IRA — not by withholding from the converted amount. If you withhold from the IRA to pay the tax, you're effectively reducing the amount converted, and if you're under 59½, the withheld amount may be subject to a 10% early withdrawal penalty. Use a taxable savings or brokerage account to cover the tax bill.

Roth conversion planning is one of the areas where working with a CPA or financial planner who specializes in retirement income planning pays the highest dividends. The interplay between bracket management, IRMAA, Social Security taxation, RMDs, state taxes, and estate planning goals requires a coordinated strategy — not a one-time calculation. Most retirees who do systematic Roth conversions across a 5–10 year window save meaningfully on lifetime taxes, but getting the sizing right requires professional guidance.

💡 This content is for educational purposes only and does not constitute tax or financial advice. Roth conversion rules and tax rates are subject to change. Please consult a qualified tax professional before executing a Roth conversion strategy.