Roth Conversion Strategy 2026: Should You Convert Before Tax Rates Change?

I'll never forget the conversation I had with Tom, a 63-year-old engineer who had just retired with $1.2 million in his traditional 401(k). He was proud of his discipline—maxing out contributions for 30 years, never touching the money, living below his means.

Then I asked him a simple question: "Have you thought about the taxes you'll owe when you start taking this money out?"

His face went pale. "I figured I'd be in a lower tax bracket when I retire, so it wouldn't be a big deal."

That's what everyone thinks. And for Tom, it was dangerously wrong. Here's why:

• At 73, he'll be forced to take Required Minimum Distributions (RMDs) of roughly $45,000+ annually
• Combined with Social Security ($35,000) and his pension ($25,000), his annual income would be $105,000
• His tax bracket? 24%—exactly what he paid during his working years
• Plus, those RMDs increase his Medicare premiums through IRMAA surcharges

Tom thought he was "deferring" taxes. In reality, he was creating a tax time bomb that would explode in his 70s and 80s.

This is where Roth conversions come in—and why 2026 might be your best opportunity to defuse that bomb.

What Is a Roth Conversion? (The Simple Explanation)

A Roth conversion is when you move money from a traditional IRA, 401(k), or similar tax-deferred account into a Roth IRA. You pay income taxes on the converted amount in the year you do it, but then that money grows tax-free forever and comes out tax-free in retirement.

Think of it like this:

When you do a Roth conversion, you're essentially volunteering to pay taxes now instead of later. The question is: Why would you do that?

5 Reasons to Consider a Roth Conversion in 2026

Reason #1: Tax Rates Are Historically Low (But Not For Long)

The Tax Cuts and Jobs Act of 2017 lowered tax rates significantly. But here's the catch: those provisions expired at the end of 2025. Unless Congress acts (and that's a big "if"), we're looking at higher tax rates starting in 2026.

Here's what happened:

Translation: If you're in the 22% bracket right now, you could be paying 25% on the same income starting in 2026. That's a 13.6% increase in your tax rate.

By doing Roth conversions now while rates are lower, you lock in today's rates and avoid paying higher rates later.

Reason #2: Avoid Future RMDs and Stay in Lower Tax Brackets

Remember Tom from earlier? His problem wasn't just taxes—it was forced distributions that pushed him into higher brackets and triggered Medicare IRMAA surcharges.

When you turn 73, the IRS requires you to take RMDs from traditional IRAs and 401(k)s. The calculation is roughly:

Those RMDs are added to your other income (Social Security, pensions, rental income, part-time work). For many retirees, this pushes them into the 24% or even 32% tax bracket when they thought they'd be in the 12% bracket.

Roth IRAs have no RMDs during your lifetime. By converting traditional IRA money to Roth now, you reduce your future RMD burden and potentially save tens of thousands in taxes.

Reason #3: Tax-Free Growth for 20-30+ Years

Let's say you convert $100,000 from a traditional IRA to a Roth at age 60. You pay taxes on that $100,000 today (let's say $22,000 in the 22% bracket).

If that money grows at 6% annually for 25 years:

• The account grows to approximately $429,000
• In a traditional IRA, you'd owe taxes on all $429,000 when withdrawn (potentially $107,000+ at 25% rates)
• In a Roth IRA, you owe $0—it's all tax-free

You paid $22,000 in taxes upfront and avoided $107,000 in taxes later. That's an $85,000 savings on just one $100,000 conversion.

Reason #4: Protect Against Medicare IRMAA Surcharges

We talked about this in our Social Security and Medicare article, but it's worth repeating: high income triggers higher Medicare Part B and Part D premiums.

2026 IRMAA brackets for Medicare Part B:

• Under $106,000 (single): $202.90/month
• $106,000-$133,000: $285.10/month ($82/month more)
• $133,000-$167,000: $409.00/month ($206/month more)
• $167,000-$200,000: $532.90/month ($330/month more)

RMDs from large traditional IRAs can easily push you into these higher brackets. Every $27,000 of extra income could cost you $984/year in additional Medicare premiums.

Roth withdrawals don't count as income for IRMAA purposes. By converting to Roth now, you create a source of tax-free, IRMAA-free retirement income.

Reason #5: Tax-Free Inheritance for Your Heirs

If you don't need all your retirement savings, you might want to leave some to your kids or grandkids. Here's where Roth conversions become incredibly powerful.

Traditional IRA inheritance:

• Your heirs must withdraw the entire inherited IRA within 10 years (SECURE Act 2.0 rules)
• Every dollar withdrawn is taxable at their ordinary income rates
• If they're in their peak earning years (40s-50s), they could be in the 32% or 37% bracket

Roth IRA inheritance:

• Your heirs must withdraw within 10 years (same rule)
• But every dollar is tax-free
• No impact on their tax bracket, Medicare premiums, or financial aid for their kids

By paying taxes at your (presumably lower) tax rate now, you save your heirs from paying at their (presumably higher) tax rate later. It's one of the most powerful wealth transfer strategies available.

How to Execute a Roth Conversion Strategy in 2026

Okay, so Roth conversions sound great in theory. But how do you actually do it without screwing up? Here's the step-by-step process:

Step 1: Identify Your Target Tax Bracket

The goal isn't to convert everything at once (that would trigger massive taxes). The goal is to convert strategically up to a certain tax bracket.

For most retirees, the sweet spots are:

• 12% bracket: Income up to $94,300 (married filing jointly) or $47,150 (single) in 2026
• 22% bracket: Income up to $201,050 (MFJ) or $100,525 (single)
• 24% bracket: Income up to $383,900 (MFJ) or $191,950 (single)

Most financial advisors recommend converting up to the top of the 22% or 24% bracket, depending on your situation. Going higher than that usually doesn't make sense unless you have very specific circumstances.

Step 2: Decide When to Convert

Timing matters. The best years for Roth conversions are typically:

• Early retirement (62-72): After you retire but before RMDs start at 73
• Low-income years: Years when you have medical expenses, business losses, or other deductions
• Down market years: When your IRA balance is temporarily lower (you convert more shares for the same tax cost)
• Before tax law changes: Like right now, before the TCJA provisions potentially expire

Step 3: Calculate the Tax Impact

This is where most people mess up. You need to account for:

• Federal taxes: Based on your marginal bracket
• State taxes: Some states tax retirement income, some don't
• Social Security taxation: Conversions can make more of your Social Security taxable
• Medicare IRMAA: Large conversions can trigger surcharges (though these are based on income from 2 years prior)
• ACA subsidies: If you're under 65 and buying insurance through the ACA, conversions affect your subsidies

This is complex enough that most people should use a tax calculator or work with a CPA who specializes in retirement planning. Our retirement calculator can model different conversion scenarios and show you the long-term impact.

Step 4: Execute the Conversion

Once you've decided how much to convert, the actual mechanics are simple:

1. Contact your IRA custodian (Vanguard, Fidelity, Schwab, etc.)
2. Request a Roth conversion (they have forms for this)
3. Specify the amount or percentage to convert
4. Decide whether to withhold taxes from the conversion or pay separately (usually better to pay from non-IRA funds)
5. Complete the conversion before December 31 of the tax year

Important: Unlike in the past, you cannot "undo" a Roth conversion. The recharacterization rule was eliminated in 2018. Once you convert, you're committed.

Step 5: Pay the Taxes (Smart Way)

You have two options for paying the taxes on a Roth conversion:

If you don't have cash to pay the taxes, you probably shouldn't do the conversion. Don't withhold from the IRA itself—it defeats the purpose.

Common Roth Conversion Mistakes to Avoid

Mistake #1: Converting Too Much in One Year

I've seen people convert their entire $500,000 IRA in a single year, thinking they're being efficient. The result? They pay 32% or 37% on a huge portion of the conversion, when they could have spread it over 5-10 years and paid 22% or less.

Better approach: Convert smaller amounts annually, staying within your target tax bracket.

Mistake #2: Forgetting About the Pro-Rata Rule

If you have both pre-tax and after-tax (basis) dollars in your traditional IRA, you can't just convert the after-tax portion tax-free. The IRS makes you convert proportionally from all your IRAs.

Example:

• Traditional IRA: $90,000 (pre-tax contributions)
• Traditional IRA: $10,000 (after-tax/non-deductible contributions)
• Total: $100,000

If you convert $10,000, thinking it's your after-tax money so it's tax-free, you're wrong. The IRS sees it as 90% pre-tax ($9,000 taxable) and 10% after-tax ($1,000 non-taxable).

Mistake #3: Converting Without Cash to Pay the Taxes

As mentioned earlier, withholding taxes from the conversion itself is inefficient. If you don't have at least 20-25% of the conversion amount in liquid funds to pay the tax bill, wait until you do.

Mistake #4: Not Considering State Taxes

Some states tax IRA distributions at high rates. Others don't tax retirement income at all. If you're planning to move from a high-tax state (California, New York, New Jersey) to a no-tax state (Florida, Texas, Nevada), consider waiting to convert until after the move.

Mistake #5: Ignoring the 5-Year Rule

Even though Roth IRA withdrawals are generally tax-free after age 59½, there's a "5-year rule" for conversions. Each conversion has its own 5-year clock. If you withdraw converted funds before 5 years have passed, you may owe a 10% penalty (even if you're over 59½).

This mostly affects early retirees who convert at 60 and plan to withdraw at 62. Just be aware of it.

When a Roth Conversion Doesn't Make Sense

Roth conversions aren't right for everyone. You probably shouldn't convert if:

• You need the money soon: If you're going to withdraw within 5 years, the tax-free growth benefit is minimal
• You're already in a high tax bracket: If you're paying 32%+ now and expect to be in the 12% or 22% bracket in retirement, wait
• You don't have cash to pay the taxes: Never withhold from the IRA to pay conversion taxes
• You're on ACA subsidies and need to keep income low: Conversions increase MAGI and could cost you thousands in subsidies
• You're in your 80s or 90s: There's less time for tax-free growth to compound

Your 2026 Roth Conversion Action Plan

If you've read this far, you're probably thinking: "Okay, this makes sense. What do I actually do?"

Here's your step-by-step action plan for 2026:

The Bottom Line on Roth Conversions in 2026

Roth conversions are one of the most powerful retirement tax planning strategies available—but only if you do them right and at the right time.

2026 represents a unique opportunity. With tax rates potentially rising in the coming years and RMDs looming for many pre-retirees, strategic Roth conversions now could save you tens of thousands (or even hundreds of thousands) in lifetime taxes.

But this isn't a "set it and forget it" decision. You need to:

• Understand your current and future tax brackets
• Model different conversion scenarios
• Account for Social Security, RMDs, and Medicare implications
• Execute conversions in manageable amounts over multiple years
• Have cash available to pay the taxes without cannibalizing your retirement accounts

The worst thing you can do? Nothing. Ignoring this opportunity means you'll likely pay higher taxes on RMDs in your 70s and 80s, potentially pushing you into higher brackets and triggering Medicare IRMAA surcharges.

Start by running the numbers. Use our free retirement calculator to model your specific situation, or consult with a tax advisor who specializes in retirement planning.

The time to act is now—before tax rates rise and before RMDs force your hand.