Roth Conversions: When Do They Make Sense?

1. Our verdict on Roth conversions

Quick Answer: Convert when your rate today is lower than the rate you expect later, and only up to the top of your current bracket. The best window for most people is the gap between the last paycheck and the first Social Security check. Skip it entirely if the tax has to come out of the IRA itself.

Almost every article on this subject sells the same idea: tax-free growth. Convert now, watch it compound, never pay tax again. That framing leads people to convert at the worst possible moment.

Growth barely matters here. A Roth conversion is a rate comparison and nothing else: the rate you pay this year against the rate that money would face when it finally comes out. If those two rates match, thirty years of compounding changes the answer very little, and we show that arithmetic in full further down.

So we have written this the way we build every comparison at DollarVisor: the rate question first, then the costs nobody quotes you, then the payoff. Every 2026 figure traces to the IRS, CMS or a named state revenue department, the standard behind our investing guides. No company pays for placement in anything we publish.

If you want the decision framed as a short checklist before you read the numbers, this walkthrough covers the 2026 version.

2. What is a Roth conversion, exactly?

Quick Answer: A Roth conversion moves pre-tax money from a traditional IRA, SEP or 401(k) into a Roth account. You pay ordinary income tax on the amount you move, and everything after that grows and comes out tax-free. It is the paid-upgrade version of the Roth-versus-traditional choice.

There is no income limit on a conversion and no dollar cap, though both apply to a regular Roth contribution. You can convert $5,000 or $500,000 in the same year, at any income, at any age.

What you cannot do is undo it. The IRS confirms in Publication 590-A that conversions made after 2017 cannot be recharacterized back to a traditional IRA. Before 2018 you could reverse one if the market fell. That escape hatch is gone, which is why the size of the conversion now matters so much.

Three details separate a conversion from the moves it gets confused with:

• It is not a contribution. Converting does not use up your annual IRA limit and does not require earned income. A retiree with no wages can convert.
• It is not a backdoor Roth IRA. That move converts a small non-deductible contribution with little or no tax due. Here you are choosing to pay tax on money that has never been taxed.
• It is not the after-tax 401(k) strategy. That one lives inside a workplace plan and depends on features you may not have.

One rule catches people every year. If you are old enough for required minimum distributions, take the RMD first, because an RMD can never be converted.

3. How much can you convert before you jump a bracket?

Quick Answer: Take your taxable income after the standard deduction, then subtract it from the top of your current bracket. That gap is your conversion room. A married couple on $60,000 has $73,000 of room inside the 12% bracket; a single filer on $120,000 has $1,800.

This one number decides the size of your Roth conversion, and it takes a minute to work out. Run the result through our retirement calculator to see what the converted balance becomes.

Compare rows two and three. Both are single filers in the same 22% bracket, and one has 29 times more room than the other. Bracket names tell you almost nothing on their own.

The row that matters most is the married couple on $60,000. That ordinary early-retirement household can move $73,000 out of a traditional IRA for $8,760 of federal tax. Wait five years for Social Security to start, and the same $73,000 could cost 22% or more.

4. What the same conversion costs in your state

Quick Answer: The federal bill is the same everywhere. The state bill is not. A $150,000 conversion by a 63-year-old couple costs about $6,901 in New York and exactly $0 in Illinois, Pennsylvania, Texas and Florida: a spread most retirement plans never account for.

Four of our ten launch states charge nothing on this move, and only two are the obvious no-income-tax states.

Illinois is the surprise. It charges a flat 4.95% on wages, yet its own retirement income publication says amounts rolled over to a Roth IRA come straight back out of Illinois income. Residents there convert at the federal rate and nothing more.

Michigan is the moving target. Its retirement deduction finished phasing in this year, so a couple can now shelter $135,220 of retirement income. A conversion that would have cost real money in 2023 costs $127 in 2026.

The practical lesson is about sequence. If you are retiring and relocating anyway, convert after you establish residency in the state that exempts this income, not before.

5. The Medicare surcharge nobody warns you about

Quick Answer: Medicare charges higher premiums above set income lines, using your tax return from two years earlier. One dollar over the first line costs a couple $2,296.80 for the year. It is a cliff, not a slope, and it is the most common way a sensible Roth conversion turns expensive.

Medicare calls this IRMAA, the income-related monthly adjustment amount. It hits Part B and Part D together, and each spouse pays separately.

Read that first jump again. Going one dollar over $218,000 costs a couple $2,296.80 for the year. No other part of the tax code behaves like this.

A conversion sized to the penny against a bracket can still be $500 too big for IRMAA. The two sets of lines have nothing to do with each other.

The two-year lag cuts both ways. Your 2026 premium is set by your 2024 return, so a Roth conversion made this year shows up in 2028. Age 63 is therefore the first income year that counts.

6. What converting is actually worth after 30 years

Quick Answer: If your future rate matches today’s, converting $100,000 gains about $17,000 over 30 years. If your future rate is higher, the gain grows to $63,000. If it is lower, you lose $52,000. Time magnifies the rate call rather than rescuing it.

Converting costs $24,000 in tax today. Not converting keeps that $24,000 invested in a taxable account, so a fair test counts both sides. Spreading a Roth conversion over several years works like dollar-cost averaging: you are averaging your tax rate instead of your share price.

The middle column is the one worth staring at. When today’s rate and tomorrow’s rate match, thirty years of tax-free compounding is worth $17,077 on a $100,000 conversion. That whole gain is simply the capital gains tax you avoided on the side account.

Now look left. Convert at 24%, retire into the 12% bracket, and you have handed the IRS $51,845 you never owed. Growth did not rescue that mistake. It enlarged it.

7. Five windows when a Roth conversion usually wins

Quick Answer: Converting is a decision about years, not about people. The five best windows all share one feature: your income is temporarily lower than it will be for the rest of your life. Most of them last two to eight years, which is why retirement planning tends to circle back to this move.

Nobody is a “good Roth conversion candidate” forever. You get a window, and then it shuts.

1. The gap years. You have stopped working but have not started Social Security or required withdrawals. Taxable income can be near zero and the 12% bracket sits wide open. This is the most valuable window most people get.
2. A year out of work. A layoff, a sabbatical, a start-up year, or a spouse leaving work. One low-income year is an opportunity, not just a setback.
3. After a market fall. The same number of shares moves across for a smaller tax bill, and the recovery happens inside the Roth.
4. When your heirs are high earners. Inherited IRAs generally have to be emptied within ten years, so every dollar lands on your children during their peak earning decade. Paying your 22% can save their 32%.
5. Before one spouse is likely to file alone. The survivor moves to single brackets on close to the same income, which can push the same withdrawal up two brackets.

Window five is the uncomfortable one, and it produces the largest savings. A couple in the 22% bracket often becomes a single filer in the 24% or 32% bracket on less income, not more.

8. Four times converting costs you money

Quick Answer: Skip the conversion if the tax must come from the IRA, if you claim an ACA health subsidy, if a child files for financial aid in the next two years, or if you are already in a peak earning year. Each of these turns a fair trade into a loss.

The reasons to skip are more concrete than the reasons to convert, and three of the four have nothing to do with your tax bracket.

• You would pay the tax out of the IRA. This is the deal-breaker. Convert $100,000, withhold $24,000 from the account, and only $76,000 reaches the Roth. Under 59½, that withheld amount also counts as an early distribution and carries a 10% penalty.
• You buy health insurance on the exchange. Premium tax credits shrink as income rises, so a conversion can cost thousands in lost subsidy on top of the tax. Before Medicare age, that usually outweighs the benefit.
• A child applies for college aid soon. Aid formulas read your tax return from two years back, exactly like Medicare does.
• You are in your top earning years. Converting at 32% to avoid a future 22% is paying more tax, earlier. Wait for the window.

Only the first is a genuine tax trap. The other three are timing problems, and timing is something you control.

9. How to convert without getting burned

Quick Answer: Five steps, in order: check your pro-rata exposure, set the amount, move it trustee-to-trustee, pay the tax from savings, then file Form 8606. Doing them out of order is what creates the surprise bills. Your brokerage handles the mechanics in a few clicks.

1. Check every traditional IRA you own. The pro-rata rule treats all your traditional, SEP and SIMPLE IRAs as one pot, so a large pre-tax balance makes even a small conversion mostly taxable. The Form 8606 instructions show the calculation. Rolling the pre-tax balance into a workplace 401(k) first can clear it.
2. Set the amount against three lines, not one. The top of your bracket, the nearest IRMAA threshold, and any subsidy or aid cliff. Convert to the lowest of the three.
3. Move it trustee-to-trustee. A direct transfer inside the same firm avoids the 60-day rollover rules, and in Pennsylvania it is the difference between $0 and a state tax bill.
4. Pay the tax from savings. Make an estimated payment in the quarter you convert, or raise withholding on other income, so April brings no underpayment penalty.
5. File Form 8606 for the year. It tells the IRS which part of the conversion was already-taxed money. Miss it and you can pay tax twice on the same dollars.

Step one is where the money is. Someone with a $400,000 rollover IRA who converts $7,000 of after-tax money is not making a tax-free move. Roughly 98% of it is taxable, because the IRS looks at the whole pot.

10. So should you convert in 2026?

Quick Answer: Yes if you are in a temporarily low year, can pay the tax from savings, and stay under both your bracket top and the nearest IRMAA line. No if you are in a peak earning year or expect a lower rate later. See how we build these comparisons before you rely on the figures.

Three profiles cover most readers.

1. Retired, Social Security not started, sizeable traditional balance. Convert every year up to the top of the 12% or 22% bracket. This is the strongest case in the whole subject.
2. Still working, high income, decades to go. Wait. Your conversion year has not arrived, and converting at today’s rate is the expensive version of a good idea.
3. Retired with a modest balance and a low future rate. Skip it. If your withdrawals land in the 10% or 12% bracket anyway, there is nothing to save.

Treat a Roth conversion as an annual decision rather than a one-off. Convert a slice each year, check the three lines each year, and stop when the window closes. We recalculate these figures whenever the IRS and CMS update their tables, and companies cannot pay for placement in anything we publish.

11. Frequently Asked Questions

Short answers to the questions readers send us most. For the account basics behind them, start with our Roth and traditional IRA comparison.

1. How much tax will I pay on a Roth conversion?

The converted amount is added to your ordinary income for the year, so it is taxed at your marginal rate. A married couple with $117,800 of taxable income who converts $50,000 in 2026 pays 22% on it, or $11,000 federally, plus any state tax. Nothing is withheld unless you ask for it.

2. Is there a limit on how much I can convert?

No. Unlike a Roth contribution, a conversion has no income limit and no dollar cap. The limits that matter are practical ones: your bracket, the Medicare income thresholds, and whether you can pay the tax from savings.

3. Can I undo a Roth conversion if the market drops?

No. IRS Publication 590-A confirms that conversions made after 2017 cannot be recharacterized. Before 2018 you could reverse one until the following October, which is why older articles still mention it. The decision is now final on the day you make it.

4. Do I have to wait five years to touch the money?

Each conversion has its own five-year clock, but it only matters under 59½. Withdraw a converted amount before that clock runs out and you owe a 10% penalty, though not income tax. At 59½ or older, the conversion clock no longer applies to you.

5. Should I convert all at once or over several years?

Over several years, almost always. A single large conversion pushes you through brackets and past Medicare thresholds in one go. Annual slices sized to your bracket keep the average rate low, which is the whole point of the exercise.

This article is information, not financial or tax advice. Tax brackets, Medicare thresholds and state rules change; confirm current figures with the IRS, CMS and your state revenue department, or a qualified tax professional, before you act. See our full disclaimer.