Overview
A Roth conversion moves money from a traditional IRA or 401(k) into a Roth IRA. You pay ordinary income tax on the converted amount in the year you convert, and in exchange, that money and all its future growth become permanently tax-free — no tax on withdrawal, no RMDs during your lifetime. A "conversion ladder" means doing this deliberately, in planned amounts, over a series of years rather than all at once.
Why It Matters
The years between retiring and starting Social Security or RMDs are often the lowest-income years of your life — no paycheck yet, benefits not yet started, RMDs (which begin at 73) still years away. That gap is the cheapest window you'll ever have to convert traditional retirement money to Roth, because you're paying tax at your lowest lifetime marginal rate. Converting later, once Social Security and RMDs stack on top of each other, often means converting (or being forced to withdraw) at a meaningfully higher rate.
How It Works
- Estimate your taxable income for the year assuming no conversion (interest, dividends, any pension, part-time work).
- Identify how much room remains in your current tax bracket, or up to the next IRMAA threshold if you're near Medicare age (see the IRMAA guide — this interacts directly).
- Convert up to that ceiling, not a dollar more. Converting past a bracket or IRMAA threshold can turn a good year into an expensive one.
- Repeat annually until the traditional balance is drawn down to the desired level, or until RMDs are set to begin.
- Pay the conversion tax from outside funds (a taxable brokerage account or cash), not from the IRA itself — withholding tax from the conversion reduces the amount that actually gets Roth treatment and can trigger an early-withdrawal penalty on the withheld portion if you're under 59½.
2026 Key Numbers
- Federal brackets remain 10/12/22/24/32/35/37%, made permanent under OBBBA, with the 10% and 12% brackets getting an extra inflation adjustment in 2026.
- The 5-year rule applies separately to each conversion: converted funds must sit in the Roth for 5 years (or until 59½, whichever is later) before earnings can be withdrawn penalty-free.
- If you're within 2 years of Medicare enrollment, every dollar converted raises MAGI used for the IRMAA lookback — model this before converting (see IRMAA guide).
Common Mistakes
- Converting a flat percentage every year regardless of what else is happening in income that year, rather than checking the actual bracket/IRMAA room annually
- Withholding taxes from the IRA itself instead of paying from outside cash
- Ignoring state income tax on the conversion — some states tax conversions even if you're planning to move somewhere tax-free shortly after
- Converting aggressively right before applying for ACA marketplace subsidies (if retiring before 65) without checking the income cliff
Sources
- IRS Revenue Procedure 2025-32 (2026 tax bracket thresholds)
- Charles Schwab — One Big Beautiful Bill Act Tax Cuts (schwab.com)
- Kitces.com — IRMAA and Roth Conversion Planning Strategies
This is general education, not personalized tax advice. Work with a CPA or fee-only planner to model your specific conversion ladder.