Most of us spend our working years trying to defer taxes.

Put money into a traditional 401(k). Get the tax benefit today. Let the account grow. Pay the taxes later.

That can work very well.

But eventually, “later” arrives.

If you retire with a large traditional 401(k) or IRA, you may discover that you didn’t eliminate the tax bill. You postponed it.

That’s where Roth conversions enter the conversation.

A Roth conversion moves money from a pre-tax retirement account into a Roth account. The taxable portion of the conversion generally counts as ordinary income in the year you convert it.

In other words, you voluntarily pay taxes now.

Why would anyone do that?

Because paying tax at a rate you can plan for today may be preferable to paying tax at an unknown, and potentially higher, rate later.

Once money reaches a Roth IRA, future qualified distributions can be tax-free. Roth IRA owners also aren’t subject to required minimum distributions during their lifetimes.

The IRS explains Roth IRA conversions and their tax treatment in Publication 590-A:

IRS Publication 590-A: Contributions to Individual Retirement Arrangements
https://www.irs.gov/publications/p590a

The concept sounds simple.

The strategy behind it isn’t.

1. The Core Roth Conversion Strategy: Pay Tax When the Price Is Right

At its core, a Roth conversion is a tax-rate decision.

Imagine you have $1 million in a traditional IRA.

You could leave it there, continue deferring taxes and eventually take taxable withdrawals.

Or you could gradually convert portions of that money to Roth.

The important question isn’t simply:

“Should I convert to Roth?”

A much better question is:

“At what tax rate am I willing to convert?”

If you can convert dollars at 12% or 22% today that you reasonably expect could otherwise be taxed at 24%, 32% or higher later, paying some tax early may make sense.

But converting isn’t automatically better.

Convert too much in one year and you could push part of the conversion into a higher tax bracket. You could also increase Medicare premiums, affect the taxation of other income or simply pay tax earlier than necessary.

That’s why Roth conversion planning often works better as a multi-year strategy than a one-time decision.

2. Bracket-Filling: Use the Tax Bracket Instead of Wasting It

One of the most useful Roth conversion strategies is sometimes called “bracket-filling.”

Federal income tax brackets are marginal. Moving into a higher bracket doesn’t suddenly subject all of your income to that higher rate. Only the dollars that fall within that bracket face the higher marginal rate.

For 2026, for example, the 22% federal income tax bracket for married couples filing jointly runs from taxable income above $100,800 through $211,400. The 24% bracket begins above $211,400.

For single filers, the 22% bracket begins above $50,400 and the 24% bracket begins above $105,700.

Source:

IRS: 2026 Federal Income Tax Rates and Adjustments
https://www.irs.gov/newsroom/working-families-tax-cuts-individuals-and-workers

Suppose your taxable income leaves you with $60,000 of room before you reach the top of the tax bracket you’re targeting.

Instead of converting $200,000 and pushing a substantial portion into higher brackets, you might convert roughly enough to use some or all of that $60,000 of available space.

Then you run the calculation again next year.

And the year after that.

The idea is simple.

Use favorable tax brackets intentionally rather than allowing them to go unused.

3. The Retirement “Gap Years” Can Be Prime Conversion Years

For many retirees, there is a period when taxable income falls substantially.

You stop working.

Your salary disappears.

Perhaps you haven’t started Social Security yet.

Required minimum distributions haven’t begun.

Suddenly, you may find yourself in one of the lowest-income periods you’ve experienced in decades.

That can create an opportunity.

Instead of simply enjoying the lower tax bill, you may choose to deliberately create taxable income by converting part of a traditional IRA to Roth.

Imagine retiring at 62.

Depending on your circumstances, you could have several years before Social Security and RMDs add additional taxable income to your return.

Those years may give you an opportunity to move portions of your pre-tax retirement savings into Roth accounts while controlling the tax brackets those conversions fill.

Once Social Security, pensions and RMDs start stacking on top of one another, the same conversion could become more expensive.

One important point: an RMD itself generally isn’t eligible for rollover or conversion. Once RMDs apply, you generally need to satisfy the year’s RMD before converting additional eligible IRA dollars.

The IRS discusses this in Publication 590-B:

IRS Publication 590-B: Distributions From IRAs
https://www.irs.gov/publications/p590b

Low-income years aren’t necessarily years when you want to pay the least possible tax.

Sometimes they are years when paying some tax intentionally could improve the years ahead.

4. A Market Downturn Can Create a Roth Conversion Opportunity

Nobody enjoys seeing a portfolio fall 20%.

But lower market values can create an unusual Roth conversion opportunity.

Suppose an investment worth $100,000 falls to $75,000.

If you convert it while it’s worth $75,000, the conversion generally creates taxable income based on that lower value.

Now imagine the investment eventually recovers and grows to $120,000 inside the Roth.

Assuming the requirements for qualified Roth distributions are met, that subsequent growth could eventually come out tax-free.

You moved the investment through the tax door while its value was temporarily lower.

Of course, nobody knows when a market will recover. A declining investment can continue declining.

But if you already planned to make a Roth conversion, a market downturn can create an opportunity worth reviewing.

5. The Two Roth 5-Year Rules People Constantly Mix Up

Mention the “Roth 5-year rule” and you may hear several different explanations.

There’s a reason for that.

There isn’t just one 5-year rule.

For Roth IRA earnings to come out as part of a qualified distribution, one requirement involves a five-tax-year period that generally starts with the first tax year for which you made a contribution to any Roth IRA. A qualifying event must also occur, such as reaching age 59½.

Then there’s a separate 5-year concept that applies to conversions.

Each conversion has its own 5-year period for purposes of determining whether an early distribution of certain taxable converted amounts could trigger the 10% additional tax.

This second rule matters primarily when you’re under age 59½.

The IRS specifically notes that these are separate 5-year periods and that each conversion has its own clock.

Source:

IRS Publication 590-B: Roth IRA Distributions and 5-Year Rules
https://www.irs.gov/publications/p590b

So saying, “I’ve had my Roth for five years,” doesn’t answer every Roth withdrawal question.

Your age, contribution history, conversion dates and the type of dollars you’re withdrawing all matter.

6. IRMAA: The Roth Conversion Bill That Can Arrive Two Years Later

Here’s one of the Roth conversion consequences people frequently miss.

A conversion increases modified adjusted gross income used for Medicare’s Income-Related Monthly Adjustment Amount, commonly called IRMAA.

Medicare generally uses income information from two years earlier.

That means a conversion completed in 2026 could affect Medicare premiums in 2028.

For perspective, in 2026 the standard Medicare Part B premium is $202.90 per month.

For married couples filing jointly, IRMAA begins when the income used for the 2026 determination exceeds $218,000. For single filers, it begins above $109,000.

At the highest 2026 income tier, the Part B premium reaches $689.90 per month per person. Part D has its own IRMAA surcharge.

Sources:

CMS: 2026 Medicare Part B Premiums and IRMAA
https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles

Social Security: Medicare Premiums and Income Lookback
https://www.ssa.gov/benefits/medicare/medicare-premiums.html

A conversion that pushes you slightly over an IRMAA threshold can therefore have consequences beyond the federal income tax bill.

That doesn’t automatically make the conversion a bad idea.

Paying higher Medicare premiums for a period could still make sense if the conversion produces a greater long-term benefit.

But IRMAA belongs in the calculation.

Don’t stop at:

“What tax bracket am I in?”

Also ask:

“What else changes if I add this income?”

7. How You Pay the Conversion Tax Matters

Suppose you convert $100,000 and, purely for illustration, the conversion results in $22,000 of federal income tax.

Where does that $22,000 come from?

Option one:

You withhold $22,000 from the retirement account.

Only $78,000 reaches the Roth.

Option two:

You convert the full $100,000 and pay the $22,000 tax from cash or another non-retirement account.

Now the entire $100,000 has the opportunity to grow inside the Roth.

That’s a meaningful difference.

For someone under 59½, using conversion proceeds to pay taxes can create another potential problem. Money removed from the retirement account rather than successfully converted may be subject to the 10% additional tax unless an exception applies.

When practical, paying conversion taxes from outside funds can improve the economics of a conversion because more money remains inside the tax-advantaged account.

But don’t empty your emergency savings just to pay a Roth conversion tax.

Liquidity still matters.

8. The Pro-Rata Rule: You Can’t Simply Convert “The After-Tax Part”

This catches a lot of people.

Suppose your traditional IRAs contain:

$90,000 of pre-tax money

and

$10,000 of after-tax basis.

You might think:

“I’ll convert the $10,000 after-tax portion and owe no tax.”

The rules generally don’t let you cherry-pick those dollars that way.

For purposes of determining the taxable and nontaxable portions of IRA distributions and conversions, the calculation considers applicable traditional IRA balances together. Traditional SEP and SIMPLE IRAs also generally enter the Form 8606 calculation.

In our simplified example, 10% of the $100,000 represents after-tax basis.

That doesn’t mean you can simply identify one $10,000 piece of the account as “the tax-free money” and convert it separately.

Form 8606 calculates the taxable and nontaxable portions.

Sources:

IRS: Instructions for Form 8606
https://www.irs.gov/instructions/i8606

IRS: About Form 8606
https://www.irs.gov/forms-pubs/about-form-8606

This is one of those areas where a seemingly simple DIY Roth strategy can produce an unexpected tax bill.

9. The SECURE Act Changed the Inheritance Conversation

Roth conversions aren’t only about your retirement.

They can affect what your children inherit.

For deaths after 2019, many non-spouse designated beneficiaries who aren’t considered eligible designated beneficiaries must empty an inherited retirement account by the end of the tenth year following the owner’s death.

There are important exceptions and additional rules, so “everyone has 10 years” isn’t accurate.

But the 10-year rule changed the planning conversation.

Imagine your adult child inherits a large traditional IRA while they’re in their peak earning years.

Distributions from that inherited traditional IRA could stack on top of their salary and other taxable income.

Inherited Roth IRAs can also fall under the 10-year distribution rule. But withdrawals of Roth contributions are tax-free, and most withdrawals of earnings from an inherited Roth are also tax-free when the applicable requirements have been met.

Source:

IRS: Retirement Topics, Beneficiary and Inherited IRA Rules
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

This creates an interesting estate-planning question:

Who is likely to pay the tax at the better rate, you or your heirs?

If you’re able to convert at a relatively favorable rate today while your children could inherit the traditional account during high-income years, converting may become more attractive.

But the opposite can also happen.

If you’re in a high tax bracket and your beneficiaries are likely to be in much lower brackets, paying a large conversion tax today may not make sense.

The beneficiary matters.

So does their likely tax situation.

10. The “Widow’s Penalty” Can Change the Roth Conversion Math

Imagine a married couple filing jointly throughout retirement.

Then one spouse dies.

The surviving spouse may eventually file as a single taxpayer while still receiving much of the household’s previous income.

One Social Security benefit may disappear, but the survivor could still have pension income, investment income and RMDs.

Meanwhile, the single tax brackets are much narrower.

Look at the 2026 federal brackets.

The 24% bracket begins above $211,400 of taxable income for married couples filing jointly.

For a single filer, it begins above $105,700.

Source:

IRS: 2026 Federal Income Tax Rates
https://www.irs.gov/newsroom/working-families-tax-cuts-individuals-and-workers

That’s a dramatic difference.

A couple may decide to make strategic Roth conversions while both spouses are alive and filing jointly, potentially reducing the amount of future pre-tax retirement money that could eventually land on one surviving spouse’s single tax return.

You’re not only planning for today’s tax return.

You’re also planning for the tax return one spouse may eventually file alone.

11. Roth Conversion vs. Staying Traditional: Let’s Run the Numbers

Let’s put some numbers behind the strategy.

Assume a retired couple has $500,000 of traditional IRA money they’re considering converting over several years.

We’ll intentionally keep this illustration simple.

Scenario A: Roth conversion

Amount converted:

$500,000

Assumed average federal tax rate on conversion:

22%

Federal conversion tax:

$110,000

Now assume the $500,000 inside the Roth remains invested for 15 years and earns a hypothetical 6% annual return.

It grows to approximately:

$1.20 million.

If future Roth distributions are qualified, federal income tax on those distributions would generally be $0.

Scenario B: Leave it traditional

The same $500,000 remains invested for 15 years at the same hypothetical 6% annual return.

It also grows to approximately:

$1.20 million.

Now assume, purely for illustration, that future withdrawals ultimately face an average effective federal income tax rate of 28%.

Approximate federal tax:

$335,000.

The nominal tax difference in this deliberately simplified example is approximately:

$225,000.

But that does NOT mean the Roth conversion created a $225,000 economic benefit.

Why?

Because the Roth strategy required paying $110,000 of tax years earlier.

That $110,000 has an opportunity cost. Had it remained invested elsewhere, it might have grown substantially over those 15 years.

A proper comparison would also need to consider:

• Where the conversion tax came from
• The investment return that money could otherwise have earned
• Future tax rates
• RMDs
• State income taxes
• Social Security taxation
• Medicare IRMAA
• The couple’s spending needs
• The surviving spouse’s future tax situation
• What eventually passes to heirs or charity

Change the assumptions and you can change the winner.

If you convert at 32% today and would otherwise withdraw the money at 22% later, the conversion could look considerably less attractive.

That’s why the goal isn’t simply to convert.

The goal is to identify favorable tax-rate opportunities.

12. Roth Conversion vs. QCD: Which One Wins for a Charitably Inclined Retiree?

This is where Roth conversion planning gets especially interesting.

Suppose you know you want to leave a substantial amount of retirement money to charity.

Should you convert those traditional IRA dollars to Roth today?

Maybe not.

A Qualified Charitable Distribution, or QCD, allows an eligible IRA owner age 70½ or older to transfer qualifying IRA dollars directly to an eligible charity.

When the requirements are met, the QCD can exclude an otherwise taxable IRA distribution from income.

It can also count toward an RMD.

For 2026, the annual QCD exclusion limit is $111,000 per eligible individual.

Sources:

IRS: 2026 QCD Inflation Adjustment
https://www.irs.gov/irb/2025-49_IRB

IRS Publication 590-B: Qualified Charitable Distributions
https://www.irs.gov/publications/p590b

Consider $100,000 that you know you ultimately want to give to charity.

Option A:

Convert the $100,000 to Roth now and pay tax on the taxable conversion.

Then eventually use the money for charitable giving.

Option B:

Leave those dollars in the traditional IRA and, once eligible, make qualifying charitable distributions directly from the IRA.

If those dollars were always destined for charity, paying tax to convert them first may accomplish very little.

A QCD may prove more tax-efficient because the qualifying IRA distribution can potentially stay out of gross income in the first place.

That can have additional value when other calculations depend on income.

Now change one fact.

Suppose that $100,000 isn’t going to charity.

It’s going to your children.

Suddenly the Roth conversion may deserve another look.

This leads to a useful way of thinking about retirement accounts:

Don’t simply ask whether Roth conversions or QCDs are “better.”

Ask:

“What is this money ultimately FOR?”

Money intended for charity may be a strong candidate to remain in a traditional IRA for future QCDs.

Money intended for heirs may be a stronger Roth conversion candidate under the right tax circumstances.

Money you expect to spend yourself requires its own calculation.

That’s what thoughtful tax planning often looks like.

Not one giant decision.

A series of smaller decisions about which dollars should go where, when taxes should be paid, and who will ultimately use the money.

The Better Roth Conversion Question

The question isn’t simply:

“Should I do a Roth conversion?”

Instead, ask:

How much should I convert this year?

At what marginal tax rate?

How much room do I have in the bracket I’m targeting?

Could the conversion trigger IRMAA?

Can I pay the tax without pulling money from the IRA?

What happens when RMDs begin?

What tax bracket could my surviving spouse eventually face?

Who will inherit the account?

How much do I intend to leave to charity?

And perhaps most importantly:

Am I paying tax today because doing so improves the plan, or simply because Roth sounds better?

Sometimes the right conversion might be $100,000.

Sometimes it might be $20,000.

Sometimes it might be zero.

The number should come from the plan, not the trend.

If you’re approaching retirement or currently in the years between your last paycheck and RMDs, this may be an especially useful time to run the numbers before that window closes.

At Unique Investment Advisors, we help clients look at retirement decisions in the context of the entire financial picture, including investments, retirement income, taxes, Medicare and the legacy they want to leave.

A Roth conversion shouldn’t start with:

“How much can I convert?”

Start with:

“What are we trying to accomplish?”

Then work backward from there.

Frequently Asked Questions About Roth Conversions

Is a Roth conversion taxable?

Generally, yes. Previously untaxed amounts converted from a traditional IRA to a Roth IRA are generally included in gross income for the year of the conversion. After-tax basis can change the taxable amount.

Can I convert my entire traditional IRA to a Roth IRA?

You can generally convert all or part of an eligible traditional IRA, but converting a large balance in one year can create a substantial tax bill and may have other consequences. The amount you can convert and the amount you should convert are two very different questions.

Do Roth conversions count toward IRMAA?

A taxable Roth conversion increases income and can increase the MAGI used to determine Medicare IRMAA. Medicare generally uses tax information from two years earlier, so the effect can show up later.

Can I convert my RMD to a Roth IRA?

An amount that must be distributed as an RMD isn’t eligible for rollover treatment. If you’re subject to an RMD, that required amount generally needs to come out before additional eligible dollars are converted.

Is there an income limit for Roth conversions?

Roth conversions aren’t subject to the income limits that restrict some direct Roth IRA contributions.

Should I convert during a market downturn?

A lower account value can make a conversion attractive because you’re converting the asset at its reduced value. Whether it makes sense still depends on your tax rate, financial plan, available cash and expectations for the investment.

Should I convert my IRA before leaving it to my children?

Possibly. Many non-spouse beneficiaries face the 10-year inherited-account rule. A Roth conversion can sometimes shift the tax burden from heirs to the original owner, but whether that’s beneficial depends heavily on the tax rates of both generations.

Is a Roth conversion better than a QCD?

They solve different problems. If IRA money is ultimately intended for charity, keeping those dollars in a traditional IRA for future QCDs may be more tax-efficient than paying tax to convert them first. Dollars intended for personal spending or heirs require a different analysis.

This content is for informational purposes only and should not be considered tax or legal advice. Roth conversions can have significant tax consequences, and tax laws and thresholds can change. Consult with your tax and financial professionals regarding your individual circumstances. Investing involves risk, including loss of principal.