Strategic Roth Conversions: The Ultimate Guide to Tax-Free Retirement

Why Roth Conversions Matter More Than Ever

If you have $500,000 or more in traditional retirement accounts, you're sitting on what financial professionals call a "tax time bomb." Every dollar in your traditional IRA or 401(k) will eventually be taxed — the only question is when and at what rate.

Strategic Roth conversions allow you to move money from tax-deferred accounts into a Roth IRA, paying taxes now at known rates to enjoy tax-free growth and withdrawals later. Done correctly, this strategy can save six figures in lifetime taxes.

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made the Tax Cuts and Jobs Act's lower individual tax rates permanent. That removed the 2026 sunset that had been driving urgency — but it also means today's historically low brackets are the new baseline. Combined with a higher standard deduction ($31,500 for married filing jointly), a new senior standard deduction ($4,000 per person for ages 65+, available 2025-2028), and the SALT cap increase to $40,000, the conversion math has shifted in ways that create new planning opportunities.

But "done correctly" is the operative phrase. A poorly timed or oversized conversion can trigger Medicare surcharges (IRMAA), push you into higher tax brackets, eliminate the new senior deduction (which phases out at $150,000-$250,000 MFJ MAGI), or create unnecessary tax bills.

This guide walks you through everything you need to know.

How Roth Conversions Work

A Roth conversion is straightforward in concept:

1. You move money from a traditional IRA (or 401k rolled into an IRA) into a Roth IRA
2. You pay income tax on the converted amount in the year of conversion
3. The money grows tax-free in the Roth IRA from that point forward
4. Withdrawals are tax-free in retirement (after age 59½ and the 5-year rule)

The strategic question isn't whether to convert — it's how much to convert each year over a multi-year window to minimize total taxes paid.

The Math Behind Strategic Conversions

Consider a couple, both age 62, with $1.2 million in traditional IRAs and $60,000 in Social Security income starting at 67.

Scenario A: No Conversions

• At age 73, Required Minimum Distributions (RMDs) begin
• By then, the accounts have grown to ~$1.8 million
• Year-one RMD: ~$72,000 (on top of Social Security)
• Combined income pushes them into the 24% bracket
• IRMAA kicks in — Medicare premiums increase by $2,400/year per person
• Over 20 years of RMDs: ~$380,000 in federal taxes

Scenario B: Strategic 10-Year Conversion

• Convert $80,000-$120,000 per year from age 62-72
• Stay within the 22% bracket each year
• By 73, traditional IRA balance is significantly reduced
• RMDs are minimal — Social Security taxed at lower rate
• No IRMAA penalties triggered
• Over the same 20 years: ~$240,000 in total taxes
• Net savings: ~$140,000

These numbers vary based on individual circumstances, which is why running the analysis with real numbers is essential. Our Advanced Roth Planner can model your specific situation.

The Five Tax Traps to Avoid

1. The Tax Bracket Cliff

Now that the OBBBA has made the TCJA's lower tax rates permanent, the brackets you see today are here to stay (barring future legislation). Converting too much in a single year can still push you from the 22% bracket ($96,950 for married filing jointly in 2026) into the 24% bracket — or worse, into the 32% bracket at $206,700. The goal is to "fill up" your current bracket without spilling over.

Use our Tax Impact Calculator to find your optimal conversion amount.

2. IRMAA Medicare Surcharges

If your Modified Adjusted Gross Income (MAGI) exceeds $206,000 (married filing jointly, 2026), Medicare Part B and Part D premiums increase significantly. The first tier alone adds ~$2,400 per person per year — and it's based on income from two years prior.

A $10,000 over-conversion could cost you $4,800+ in IRMAA penalties over two years. Our IRMAA Penalty Calculator shows exactly where the cliffs are.

3. The Pro-Rata Rule

If you have both pre-tax and after-tax money in traditional IRAs, you can't selectively convert just the after-tax portion. The IRS applies the pro-rata rule: every dollar converted is a proportional mix of pre-tax and after-tax money.

This catches many people off guard. If 85% of your total IRA balance is pre-tax, then 85% of every conversion is taxable — regardless of which account you convert from.

4. Social Security Taxation Triggers

Up to 85% of your Social Security benefits can be taxed if your combined income exceeds $44,000 (married filing jointly). Roth conversion income counts toward this threshold.

Strategic timing matters: converting heavily before Social Security begins (ages 62-67 for many) keeps your combined income lower during benefits.

5. ACA Subsidy Loss

If you're between 60 and 65 and relying on ACA marketplace insurance, conversion income counts as MAGI. A large conversion can eliminate your premium tax credits, effectively adding $10,000-$20,000+ to the cost of the conversion.

The Optimal Conversion Window

For most pre-retirees, the ideal conversion window is between retirement and age 73 (when RMDs begin). During this period:

• Employment income has stopped (lower base income)
• Social Security hasn't started yet (or is minimal)
• RMDs haven't begun (no forced income)
• Tax brackets may be at their lowest point in your lifetime

This creates a 5-15 year "sweet spot" where strategic conversions deliver the maximum benefit.

The Senior Deduction Opportunity (2025-2028)

The OBBBA introduced a new $4,000 standard deduction addition for taxpayers aged 65 and older (per person — $8,000 for a married couple both 65+). This extra deduction effectively creates more room in lower tax brackets for conversions. However, it phases out starting at $150,000 MAGI for married filing jointly and disappears entirely at $250,000. Conversion income counts toward MAGI, so oversized conversions can eliminate this benefit.

For retirees aged 65+, this creates a planning sweet spot: convert enough to use the lower brackets but stay under the senior deduction phase-out threshold.

Year-by-Year Planning

A proper conversion strategy isn't a one-time decision. Each year, you should reassess based on:

• Actual investment returns (up or down years change the math)
• Any changes in tax law (the SALT cap reverts to $10,000 after 2029; the senior deduction expires after 2028)
• Expected income from other sources
• Medicare and IRMAA thresholds (updated annually)
• State tax considerations if relocating (the higher $40,000 SALT cap through 2029 changes the calculus for high-tax state residents)

Who Benefits Most from Roth Conversions?

Strategic conversions deliver the most value for:

• Pre-retirees (ages 55-72) with significant traditional IRA/401k balances ($500K+)
• Retirees facing large RMDs who want to reduce future required distributions
• High-income earners who expect to remain in high brackets through retirement
• People planning to leave an inheritance — Roth IRAs have no RMDs for the original owner and provide tax-free income to beneficiaries
• Those relocating to lower-tax states who can convert at a lower state tax rate

The SECURE Act Factor

The SECURE Act of 2019 (and SECURE 2.0 in 2022) eliminated the "stretch IRA" for most non-spouse beneficiaries. Inherited IRAs must now be fully distributed within 10 years — and as of 2025, the IRS finalized regulations requiring annual distributions in years 1-9 (if the original owner had begun RMDs), with the remaining balance due in year 10. The penalty for missing these annual distributions is 25% of the shortfall.

The One Big Beautiful Bill Act did not change these inherited IRA rules. The 10-year distribution requirement remains fully in effect.

This means if you leave a $1 million traditional IRA to your children, they'll owe taxes on the entire amount within a decade — likely during their peak earning years when they're already in high tax brackets. Converting to Roth before passing it on eliminates this tax burden entirely, since Roth IRAs inherited under the 10-year rule are distributed tax-free.

Getting Started: Three Steps

Step 1: Know Your Numbers

Before converting a single dollar, you need to understand:

• Current tax bracket and how much room remains before the next bracket
• IRMAA thresholds and your current MAGI
• Total traditional IRA and 401(k) balances
• Expected Social Security benefits and start date
• State income tax rates (current and any planned relocation)

Our Quick RMD Calculator shows your projected required distributions, and the Tax Impact Calculator models different conversion scenarios.

Step 2: Build a Multi-Year Plan

A single-year analysis is insufficient. You need a 10-15 year projection that accounts for:

• Annual conversion amounts
• Expected account growth
• Tax bracket changes over time
• Medicare and IRMAA impacts
• Social Security optimization

The Advanced Roth Planner generates this multi-year projection automatically.

Step 3: Work with a Specialist

Roth conversion strategy sits at the intersection of tax planning, retirement income, estate planning, and Medicare. A qualified advisor who specializes in this area can identify opportunities and pitfalls that no calculator can.

If your traditional retirement accounts exceed $500,000, schedule a consultation to explore whether a strategic conversion plan makes sense for your situation.

Frequently Asked Questions

Can I undo a Roth conversion? No. Since 2018, the IRS eliminated "recharacterization" of Roth conversions. Once converted, it's permanent — which makes getting the amount right the first time essential.

Do I have to convert everything at once? Absolutely not. In fact, converting everything at once is usually the worst strategy. A multi-year approach lets you optimize tax brackets annually.

What about state taxes? State taxes add another layer of complexity. If you live in a high-tax state and plan to move to a no-income-tax state (Florida, Texas, Nevada, etc.), it may make sense to delay conversions until after the move.

Is there an income limit for Roth conversions? No. Unlike Roth IRA contributions (which have income limits), there is no income limit on Roth conversions. Anyone can convert regardless of income.

How does this affect my Medicare premiums? Roth conversion income counts toward MAGI for IRMAA determination. Premiums are based on income from two years prior, so a 2026 conversion affects 2028 Medicare premiums.