What Is a Roth Conversion and Should You Do One Before Retirement?

You have been saving in a traditional IRA or 401(k) for decades. Every dollar in those accounts is pre-tax money. Withdrawals in retirement will be taxed at ordinary income rates. If you end up with a large balance, the tax bill could be substantial and you will have no choice about it because required minimum distributions force withdrawals starting at 73.

A Roth conversion is a strategy that moves some or all of that tax-deferred money into a Roth IRA, paying the tax now at today's rates, so that future growth and withdrawals are permanently tax-free. Done strategically, it can be one of the most powerful tax planning moves available to pre-retirees.

Done without a plan, it can result in a large, unnecessary tax bill and Medicare surcharges that last for years.

What Is a Roth Conversion, Exactly?

A Roth conversion is the process of moving money from a traditional IRA, SEP IRA, SIMPLE IRA, or old 401(k) (after rolling it to a traditional IRA) into a Roth IRA. The amount you convert is added to your taxable income in the year of conversion and taxed at your ordinary income rate.

The math in a simplified example:

You have $300,000 in a traditional IRA. You convert $30,000 in 2026. That $30,000 is added to your other income for the year. If you are in the 22% tax bracket, you owe approximately $6,600 in additional federal tax on that conversion.

In exchange, that $30,000 is now inside a Roth IRA. It grows tax-free. When you withdraw it in retirement, no federal income tax is owed. If it grows to $70,000 by the time you withdraw it, you pay zero tax on the $70,000. The $6,600 you paid upfront bought you tax-free growth.

There are no income limits on Roth conversions. Unlike Roth IRA contributions (which phase out at higher incomes), anyone can convert regardless of income. This is sometimes called the backdoor Roth or Roth conversion ladder depending on the implementation.

Why the Years Before Retirement Can Be Ideal for Conversions

The most favorable window for Roth conversions is typically between retirement and age 73, when several conditions often align:

• You are no longer earning W-2 income, so your taxable income is lower than during peak working years
• Social Security has not yet started (especially if you are delaying to 70), so there is little income stacking
• RMDs have not yet begun (they start at 73), so you control your taxable income almost entirely
• Your tax brackets are temporarily lower, making each dollar of conversion cheaper

This period, often called the "Roth conversion window" or "gap years," is when many retirees can convert substantial amounts while staying within the 12% or 22% bracket. Once RMDs start at 73, they add mandatory taxable income every year whether you want it or not. See What Is a Required Minimum Distribution and When Does It Hit You? for how RMDs interact with this planning.

Even workers still in their 50s or early 60s who have a year with unusually low income (career change, sabbatical, layoff) may have a narrow window where partial conversions make sense.

How to Decide How Much to Convert

The optimal conversion amount fills your current tax bracket without spilling into the next one.

Step 1: Estimate your total income for the year (wages, investment income, rental income, pension, Social Security if applicable).

Step 2: Identify how much room remains in your current bracket before reaching the next marginal rate.

Step 3: Convert up to that amount.

Example:

Linda is 64, recently retired, and has no income except $12,000 in dividend income from a taxable account. The 22% bracket for a single filer in 2026 starts at $48,475 of taxable income (after the $15,000 standard deduction). She has approximately $36,000 of space in the 22% bracket before hitting the 24% rate.

She converts $36,000 from her traditional IRA to a Roth. She owes 22% on most of that, approximately $7,920 in federal taxes. She now has $36,000 permanently in a Roth IRA, growing tax-free for 20+ years.

If she does this for five consecutive years, she moves $180,000 into a Roth at 22%, permanently reducing her traditional IRA balance and her future RMD obligations.

The IRMAA Problem You Must Not Ignore

Here is the trap many people fall into: converting too much in a single year.

Medicare Part B and Part D premiums are based on your Modified Adjusted Gross Income (MAGI) from two years prior. This is called the Income-Related Monthly Adjustment Amount, or IRMAA. In 2026, the standard Part B premium is $202.90/month. But if your income in 2024 exceeded $109,000 (single) or $218,000 (married), you pay surcharges.

A large Roth conversion in 2026 will affect your 2028 Medicare premiums. The jump can be significant:

A $60,000 Roth conversion that pushes income from $100,000 to $160,000 triggers IRMAA surcharges of $202.90/month ($2,434.80/year) for two years. That is $4,869 in additional Medicare costs that should be factored into the conversion's cost-benefit calculation.

This does not mean conversions are not worth it. But it means the full picture includes Medicare premium impacts, not just income tax rates. For more context on Medicare costs, see What Medicare Actually Covers (And What It Does Not).

The Social Security Interaction

If you are already receiving Social Security while converting, be careful. Social Security benefits become taxable when combined income (AGI plus half of Social Security) exceeds $34,000 for single filers or $44,000 for married filers. Up to 85% of Social Security benefits can be taxable.

A Roth conversion increases AGI, which can increase the percentage of Social Security that is taxable. This creates a hidden marginal tax rate that is higher than your stated bracket. For retirees collecting Social Security, the true cost per dollar of conversion may be meaningfully higher than the headline rate suggests.

This is a major reason why converting before Social Security begins produces cleaner math and lower total tax cost. When you delay Social Security to 70, you have years before age 70 with no Social Security income, making conversions during that window more tax-efficient. See How to Decide When to Claim Social Security Benefits for the full coordination strategy.

What Happens to the Money You Convert?

Once inside a Roth IRA:

• Qualified withdrawals are completely tax-free (for both principal and growth)
• Roth IRAs have no required minimum distributions during the account owner's lifetime
• Heirs inherit the Roth IRA and benefit from tax-free withdrawals (subject to 10-year distribution rule for most non-spouse beneficiaries)
• Converted amounts are subject to a 5-year clock: early withdrawal of converted principal before 5 years incurs a 10% penalty if you are under 59 1/2

The absence of RMDs from a Roth IRA is particularly valuable for retirees who do not need the money and want to reduce taxable income in later years. A large traditional IRA generates mandatory taxable income. A Roth IRA generates none.

Real-World Examples

Example: Michael and Susan, ages 63 and 61, recently retired

Situation: Michael has $1,100,000 in a traditional IRA. Susan has $240,000. No Social Security yet (delaying to 70). Their combined income in early retirement is $22,000/year from dividends and a small rental property.

Strategy: They are married filing jointly. The 22% bracket tops out at approximately $103,350 for 2026 (after standard deduction). They convert $80,000/year for five years, staying comfortably within the 22% bracket.

Tax cost: $80,000 x 22% = $17,600/year in additional federal tax.

Result after 5 years: $400,000 moved into Roth IRAs. Their traditional IRA balances are reduced from $1,340,000 to approximately $940,000 (assuming 6% growth, offset by conversions). Projected RMDs at 73 are reduced from approximately $50,566/year to approximately $35,472/year. Over 20 years of retirement, the tax savings are substantial.

Example: Karen, 58, still working but planning

Situation: Karen earns $95,000/year. She has $450,000 in a traditional 401(k). Her employer allows in-service Roth conversions in the plan. She is in the 22% bracket.

Strategy: She does not convert while working at full income. Instead, she identifies the years between 62 (planned early retirement) and 67 (Social Security claiming) as her conversion window. She models converting $40,000/year for 5 years, estimating $88,000 in total federal tax paid to move $200,000 into tax-free status.

Long-term calculation: That $200,000 at 6% for 15 years becomes approximately $479,000 in the Roth, withdrawn tax-free. The $88,000 upfront tax bill to avoid tax on $479,000 is highly favorable at her anticipated retirement bracket.

Common Mistakes

Converting too much in a single year. One large conversion that pushes income into the 32% bracket (or triggers IRMAA) can cost more than it saves. Partial conversions over multiple years are almost always superior to a single large conversion.

Paying conversion taxes from the IRA itself. If you convert $50,000 and withhold 22% from the converted amount to pay the tax, you only end up with $39,000 in the Roth, and the $11,000 withheld may trigger early withdrawal penalties if you are under 59 1/2. Pay conversion taxes from separate taxable savings to maximize what lands in the Roth.

Ignoring state income taxes. In states with income tax, conversions are taxable at the state level too. A 22% federal rate plus a 6% state rate means each converted dollar costs 28 cents in taxes. This changes the math significantly in high-tax states.

Waiting too long. Procrastinating on conversions until RMDs have already started is the most common mistake. By 73, mandatory withdrawals add income that narrows the conversion window and reduces the tax advantage. The optimal time to act is in the years before RMDs begin, not after.

This post is for informational purposes only and does not constitute tax or financial advice. Roth conversion decisions involve complex interactions between income taxes, Medicare premiums, Social Security taxation, and individual circumstances. Consult a qualified tax professional or financial advisor before executing a conversion strategy.