Roth Conversion Guide

Why convert · Optimal timing · Fill-to-bracket · IRMAA · 5-year rule · Backdoor Roth · Inherited Roth · 2026 rules

A Roth conversion is one of the most powerful tax planning tools in retirement — but only if you use it at the right time and in the right amount. Convert too much and you trigger higher brackets, IRMAA surcharges, or heavy SS taxation. Convert nothing and face large forced RMDs in your 70s and 80s. This guide explains everything you need to make a confident, informed decision.

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What is a Roth conversion?Why convert & when Fill-to-bracket strategy IRMAA impact 5-year rule Roth 401(k) vs. Roth IRA Backdoor Roth Pro-rata rule State taxes Inherited Roth Decision checklist

RothWhat is a Roth Conversion?

A Roth conversion moves money from a pre-tax account (traditional IRA, 401(k), SEP-IRA, SIMPLE IRA) into a Roth IRA. You pay ordinary income tax on the converted amount in the year of conversion. After that, the money grows completely tax-free and can be withdrawn tax-free in retirement.

	Traditional IRA / 401(k)	Roth IRA (after conversion)
Contributions	Pre-tax (deductible)	After-tax (taxed now)
Growth	Tax-deferred	Tax-free
Withdrawals	Taxed as ordinary income	Tax-free (if qualified)
RMDs	Required from age 73/75	None during your lifetime
Annual contribution limit	$7,500 ($8,600 age 50+)	Same, with income limits

There is no annual limit on conversions — you can convert any amount from any number of pre-tax accounts in any year. The converted amount is simply added to your taxable income for that year.

Why Convert, and When?

The core logic: pay tax now at a lower rate rather than pay tax later at a higher rate. If your marginal rate in retirement (driven by RMDs, Social Security, pension) will be higher than your rate today, converting today saves money. The ideal conversion window is typically between retirement and RMDs.

You just retired and haven't started SS or RMDs

This is the golden window. Your taxable income may be at or near zero. Even converting $50,000–$80,000/year might land entirely in the 12% bracket. You'll never get rates this low again if you have significant pre-tax savings.

You expect your own future marginal rate to be higher

Conversions win when the rate you pay now is below the rate you would pay later. Several forces push retirees into higher brackets over time: large RMDs stacking on top of Social Security and a pension; the death of a spouse, after which the survivor files single — with roughly half the brackets and standard deduction (the “widow's penalty”); and crossing an IRMAA threshold. Current federal rates (10/12/22/24/32/35/37) are set by law but a future Congress can always change them, so plan around your own projected income rather than a predicted rate change.

You want to reduce future RMDs

RMDs begin at age 73 (75 if born in 1960 or later). They are calculated as a percentage of your December 31 pre-tax balance and are forced into taxable income whether you need the money or not. Converting reduces the balance subject to RMDs — permanently reducing those forced withdrawals, the resulting taxable income, and any RMD-driven IRMAA surcharges.

You want to leave a better inheritance

Non-spouse heirs who inherit a traditional IRA must generally deplete it within 10 years under the SECURE Act (2019), potentially paying tax at high rates during their peak earning years. Inherited Roth IRAs are also subject to the 10-year rule — but withdrawals are tax-free. A Roth is a dramatically better bequest for high-income children.

⚠ When conversion may not make sense: If you are currently in a high bracket (32%+), you're planning to move to a lower-tax state, your income will drop sharply in future years, or you'll need the converted money within 5 years — conversions may not be beneficial. Model each scenario carefully.

StrategyFill-to-Bracket Conversion

Rather than converting a fixed dollar amount, the fill-to-bracket strategy converts exactly enough to bring your taxable income to the top of a chosen bracket — say the 12% or 22% bracket — without crossing into the next higher bracket.

2026 federal brackets (taxable income after standard deduction)

Single — Std deduction $16,100

Rate	Taxable income up to
10%	$12,400
12%	$50,400
22%	$105,700
24%	$201,775
32%	$256,225
35%	$640,600
37%	Above

Married Filing Jointly — Std deduction $32,200

Rate	Taxable income up to
10%	$24,800
12%	$100,800
22%	$211,400
24%	$403,550
32%	$512,450
35%	$768,700
37%	Above

✓ Example: A married couple with $60,000 in pension and SS income has ~$27,800 in taxable income after the $32,200 standard deduction. The top of the 12% bracket is $100,800. Their conversion headroom is $100,800 − $27,800 = $73,000 at 12% — all going into Roth at a low marginal rate.

⚠ Converting in an RMD year: Once you have reached your RMD age (73, or 75 if born in 1960 or later), you must take that year's required minimum distribution before converting anything. The RMD is ordinary income, it cannot be converted to Roth, and it fills your bracket and IRMAA room first — leaving less headroom for a conversion. This is exactly why the years between retirement and your first RMD are the prime conversion window.

IRMAAMedicare Surcharge Impact

Roth conversions increase your MAGI, which can trigger IRMAA (Income-Related Monthly Adjustment Amount) surcharges on Medicare Part B and Part D premiums. IRMAA is based on your income 2 years prior — so a conversion at age 63 affects Medicare premiums at age 65.

2026 MAGI (Single)	2026 MAGI (MFJ)	Monthly Part B add-on
≤ $109,000	≤ $218,000	$0 (no surcharge)
$109,000+ – $137,000	$218,000+ – $274,000	+$81
$137,000+ – $171,000	$274,000+ – $342,000	+$203
$171,000+ – $205,000	$342,000+ – $410,000	+$325
> $205,000	> $410,000	+$446–higher

⚠ IRMAA cliff: IRMAA brackets are “cliffs” — one dollar over the threshold triggers the full surcharge for the entire year. A single person with $108,500 MAGI doing a $600 conversion crosses into the first IRMAA tier and pays an extra $$81.20/year × 12 in Medicare premiums. Always size your conversion to stay under the IRMAA threshold unless the long-term benefit clearly outweighs the surcharge.

✓ Timing tip: Doing conversions before age 63 completely avoids any IRMAA impact on Medicare premiums. Early retirement (e.g. ages 58–62) is the premium conversion window — tax rates are low and no IRMAA exposure yet.

ⓘ NIIT too: A large conversion also raises MAGI toward the 3.8% Net Investment Income Tax threshold ($200,000 single / $250,000 MFJ, not inflation-adjusted). The converted amount itself isn't investment income and is never directly subject to NIIT, but pushing your MAGI over the line can expose your dividends and capital gains to the surcharge for that year.

The 5-Year Rule

The Roth IRA 5-year rule is actually two separate rules that are frequently confused:

Rule 1: Earnings tax-free withdrawal (account-level)

To withdraw Roth earnings tax-free, the Roth IRA must have been open for at least 5 tax years AND you must be age 59½ or older (or meet another qualifying exception). The 5-year clock starts January 1 of the year you make your first Roth IRA contribution or conversion. This rule applies once per taxpayer — once your first Roth IRA has been open 5 years, all your Roth IRAs satisfy it.

ⓘ Converted amounts (your original Roth contribution basis) are always available tax- and penalty-free. Only the earnings on those amounts are subject to the 5-year/59½ requirement.

Rule 2: Penalty-free withdrawal of each conversion (per-conversion)

Each individual conversion has its own 5-year clock. If you withdraw converted amounts within 5 years of that specific conversion, a 10% early withdrawal penalty applies — even if you are over 59½. This rule is irrelevant once you are 59½ or older, because the 10% penalty doesn't apply to anyone over 59½ regardless.

⚠ Key implication: If you are under 59½ and doing a Roth conversion as a strategy to access retirement funds early, you must wait 5 years after each conversion to withdraw those converted amounts penalty-free. This is sometimes called the “Roth conversion ladder.”

Roth 401(k) vs. Roth IRA

	Roth IRA	Roth 401(k) / 403(b)
2026 contribution limit	$7,500 ($8,600 age 50+)	$24,500 ($32,500 age 50+)
Income limit to contribute	Yes (MAGI phase-out begins at $153,000 single / $242,000 MFJ)	No income limit
RMDs during lifetime	None	Required at 73 (unless still working)
Creditor protection	Varies by state; federal bankruptcy protection for contributory Roth/traditional IRAs is capped at an inflation-adjusted limit (amounts rolled over from employer plans are fully protected)	Strong federal protection (ERISA)
Investment choices	Any broker, unlimited options	Limited to plan options
Conversion at retirement	n/a	Can roll to Roth IRA at retirement (eliminates RMDs)

✓ Key move: When you leave an employer or retire, roll your Roth 401(k) balance into a Roth IRA. This eliminates the RMD requirement that applies to Roth 401(k)s and gives you full investment flexibility. If your Roth 401(k) has been open 5 years, the 5-year clock transfers; if not, it resets to the Roth IRA's 5-year start date.

Backdoor Roth IRA

High earners above the Roth IRA income limits ($153,000–$168,000 single; $242,000–$252,000 MFJ) can still contribute to a Roth IRA indirectly through the backdoor Roth strategy:

Make a non-deductible (after-tax) contribution to a traditional IRA ($7,500 / $8,600 if 50+).
Immediately convert it to a Roth IRA. Because you've already paid tax on the contributions, the conversion is tax-free (no gain yet if done promptly).
File Form 8606 with your taxes to document the non-deductible contribution and conversion.

⚠ Pro-rata rule applies: If you have any other pre-tax IRA money (traditional IRA, SEP, SIMPLE IRA), you cannot “isolate” the non-deductible contribution for a clean conversion. The IRS prorates the taxable and non-taxable amounts across all your IRA balances. See the pro-rata rule below.

ImportantThe Pro-Rata Rule

The IRS treats all your traditional IRAs as one single pot when you convert or withdraw. You cannot choose to convert only the after-tax (non-deductible) dollars first.

Formula: Taxable % = (Total pre-tax IRA balance) ÷ (Total IRA balance including non-deductible contributions)

Example: You have $94,000 in a traditional IRA (pre-tax) and make a $6,000 non-deductible contribution ($100,000 total). If you convert $6,000 to Roth: taxable portion = 94% of $6,000 = $5,640 taxable, only $360 tax-free.

✓ Solution: Roll your pre-tax IRA balance into a current employer's 401(k) or 403(b) plan (if the plan accepts rollovers). Once pre-tax IRA money is out of IRAs, the pro-rata rule no longer applies and you can execute a clean backdoor Roth.

State Tax Treatment

Most states that have an income tax follow federal rules and tax the converted amount as ordinary income in the year of conversion. However, several states have favorable treatment worth noting:

Category	States
No state income tax	Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
Exempt retirement income (including IRA)	Illinois, Mississippi, Pennsylvania (PA also exempts 401k distributions)
Partial IRA exclusion	Many states offer seniors age-based exclusions — varies widely, check your state

ⓘ Planning note: If you are planning to relocate in retirement — especially to a no-income-tax state — consider timing large conversions after the move. A retiree who converts $100,000 in a 5% state income tax state pays $5,000 more in state taxes than one who waits until after moving to Florida or Texas.

Inherited Roth IRA Rules

Under the SECURE Act of 2019 (effective for deaths after 2019), non-spouse beneficiaries who inherit a Roth IRA must generally deplete the account within 10 years — the “10-year rule.” For an inherited Roth the original owner is always treated as dying before their required beginning date, so no annual RMDs are required in years 1–9 — only that the account be emptied by the end of year 10. (SECURE 2.0, 2022, later added the higher RMD ages and the penalty relief that apply to the original owner.)

Beneficiary	Rule
Spouse	Can treat as own Roth IRA — no RMDs ever, no 10-year rule
Minor child (until age of majority)	Eligible Designated Beneficiary — 10-year clock starts at majority
Disabled or chronically ill	Eligible Designated Beneficiary — can stretch over lifetime
Beneficiary within 10 years in age of deceased	Eligible Designated Beneficiary — can stretch over lifetime
All other non-spouse heirs	10-year rule; account must be emptied by end of year 10 (no annual RMDs required for an inherited Roth)

✓ Why a Roth is a better inheritance: Even under the 10-year rule, an inherited Roth IRA is dramatically better than an inherited traditional IRA. Your adult children can receive — and invest — all 10 years of Roth distributions tax-free, vs. paying ordinary income tax on every dollar from a traditional IRA, often at their peak earning rates.

Roth Conversion Decision Checklist

Check the boxes that describe your situation. More green checks → more likely conversions make sense.

✓Currently in a low tax bracket (12–22%) and expect higher rates in the future

✓In retirement but not yet receiving Social Security or RMDs (low-income window)

✓Have a large pre-tax IRA or 401(k) that will drive large RMDs at 73+

✓Can pay the conversion tax from non-IRA funds (taxable account or savings), not from the IRA itself

✓Have a long time horizon — conversions compound better with many years of tax-free growth

✓Want to leave a better inheritance to beneficiaries

✓Want to reduce RMD-driven IRMAA surcharges on Medicare premiums

✗Currently in the 32%+ bracket — paying too much now vs. later

✗Would need to withdraw converted money within 5 years (penalty risk under 59½)

✗Conversion would push MAGI over an IRMAA cliff, and the surcharge exceeds the long-term benefit

✗Planning to move to a no-income-tax state soon (wait until after you move)

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🏛️ Official Government Resources

IRS: Roth IRAs ↗ — Official rules for Roth IRA contributions, conversions, and qualified distributions.
IRS Publication 590-A: Contributions to IRAs ↗ — Income limits, contribution limits, and conversion eligibility.
IRS: FAQs on Roth Conversions & Rollovers ↗ — Common questions about converting traditional IRA funds to Roth.

This guide is for educational purposes only. Tax law is complex and changes frequently. This is not tax or financial advice. See our full disclaimer or consult a CPA or financial advisor before executing Roth conversions.