Roth Conversion Strategy: How Much to Convert Each Year

A Roth conversion strategy fills a chosen tax bracket each year in the gap years before RMDs begin at 73 or 75, and stops before the next threshold.

The real question is how much to convert, and in which year. Convert too little and the pre-tax balance keeps compounding toward larger required withdrawals. Convert too much and you pay a higher rate today than you may face later. The answer is a number you work out every year, usually in the fourth quarter.

What is a Roth conversion strategy, and why do the gap years matter?

A Roth conversion moves money from a traditional IRA (or another pre-tax account) into a Roth IRA. The taxable part of the amount converted is ordinary income for the year the money leaves the traditional IRA. If you have made nondeductible IRA contributions, the share that returns that basis is not taxed again; the split is figured on Form 8606, with all your non-Roth IRAs counted together.

Required minimum distribution (RMD)

The amount you must withdraw each year from traditional IRAs and most employer plans, starting at age 73 for people born 1951 through 1958 and at 75 for people born in 1960 or later (final IRS regulations leave the 1959 rule reserved).

Modified adjusted gross income (MAGI)

Adjusted gross income with certain items added back, used by several tax rules as an income test.

Gap years

The years after paychecks stop and before RMDs begin, when taxable income can be unusually low.

Once RMDs start, the rules require a withdrawal every year, and its taxable part adds to Social Security, pensions and investment income. Before then, you choose how much pre-tax money to report. Roth IRAs carry no RMDs while the owner is alive (26 U.S.C. 408A(c)(4)), so every dollar converted early, along with its growth, drops out of the balance future RMDs are figured on. For how those RMDs can push income into a higher bracket, see our guide to RMD tax planning at age 73.

The gap years are often the only stretch of retirement when you, and not the RMD rules, decide how much taxable income to report.

How much should you convert each year?

Most Roth conversion strategy work comes down to a ceiling. You pick the highest rate you are willing to pay on converted dollars, project the rest of the year's income, and convert the difference.

1. Project this year's taxable income without a conversion. Include pensions, interest, taxable IRA withdrawals, business income and the taxable part of any Social Security benefit. Keep qualified dividends and long-term gains separate: they are taxed at their own rates and stack on top of ordinary income, so a conversion can push them out of the 0% rate, which for 2026 covers taxable income up to $98,900 for joint filers and $49,450 for single filers.
2. Choose the ceiling. Usually the top of the 12%, 22% or 24% bracket, based on the rate you expect your pre-tax money to face later.
3. Check the income tests under that ceiling. The senior deduction phase-out, the Net Investment Income Tax threshold and, if you buy Marketplace health coverage, the premium tax credit can all raise the real cost of the last dollars converted.
4. Convert the difference late in the year. Income is easier to project in November than in March, and a conversion cannot be reversed.
5. Repeat each year until RMDs begin. Income, deductions and the published thresholds all change from year to year.

Brackets use taxable income, after deductions; the other two tests use MAGI, before deductions, and mixing them up is an easy way to overshoot. The senior deduction (available for 2025 through 2028) adds $6,000 for each person age 65 or older, and each $6,000 shrinks by 6% of MAGI above $150,000 for joint filers or $75,000 for others. Conversion income is not itself net investment income, but it raises MAGI, which can pull dividends, interest and capital gains into the 3.8% tax. It also counts in the household income that sets a Marketplace premium tax credit. Medicare premiums (IRMAA) are set from the tax return two years earlier, so a 2026 conversion generally affects 2028 premiums; for reference, the 2026 surcharge starts above $218,000 of MAGI for joint filers and $109,000 for others.

A worked illustration

Take a hypothetical married couple, both 65 or older in 2026, filing jointly. They have not claimed Social Security and live on a $40,000 taxable pension plus cash savings (interest ignored to keep the math clean). Their deductions are the 2026 standard deduction of $32,200, an additional $1,650 each for age, and the full $12,000 senior deduction, so without a conversion their taxable income is zero.

While this couple's MAGI is between $150,000 and $250,000, every additional $1,000 converted raises taxable income by $1,120, because the couple loses $120 of senior deduction along with it. Once the senior deduction is fully phased out, that extra effect ends. On those dollars, the 22% bracket costs closer to 24.6%. Our article on senior deduction and Roth conversion timing walks through that phase-out in detail.

The ceiling is set by the last dollar converted, so check what that dollar triggers before you convert it.

Which ceiling makes sense: 12%, 22% or 24%?

No single answer fits everyone. Compare the rate you pay on converted dollars now with the rate you expect those dollars to face later, as RMDs or in your heirs' hands. These tend to argue for converting more:

• Large pre-tax balances. The bigger the balance when RMDs start, the bigger the RMDs that land on top of Social Security and other income.
• A likely surviving spouse. A widow or widower generally files as single in later years, with about half the bracket room. For 2026, the 24% rate starts at $105,700 of taxable income for a single filer, against $211,400 on a joint return.
• Heirs in high brackets. Most non-spouse beneficiaries must empty an inherited account by the end of the 10th year after the owner's death, and pre-tax money is taxed at the heirs' rates. Inherited Roth IRAs usually carry the 10-year deadline too, though the yearly withdrawal rules can differ, and the IRS notes that withdrawals are generally tax-free once the Roth account is at least five years old.

These tend to argue for converting less:

• No cash outside the IRA to pay the tax. Paying from the converted amount shrinks what reaches the Roth.
• A lower expected rate later. If your RMDs will be modest, or you plan to give heavily through qualified charitable distributions once you reach 70½, the case for paying 22% or 24% now gets weaker.
• A planned move. States differ in how they tax conversions, so compare the rules in your current and destination states before timing a conversion around a move. See moving to a no-income-tax state in retirement.

A Roth conversion trades a known tax rate today for an unknown one later, so the right amount is the one where today's rate looks reasonable against your own projection.

What rules can trip up a Roth conversion?

The December 31 deadline

IRS regulations tie conversion income to the year the money is distributed or transferred out of the traditional IRA. For calendar-year filers, a direct conversion meant for 2026 should be completed by December 31, 2026; with a 60-day rollover, the distribution must happen in 2026 even if the money reaches the Roth in early 2027. An IRA contribution works differently: it can be made for the prior year up to the return filing deadline. Ask your custodian for its year-end processing cutoff.

No do-overs

Conversions used to be reversible through a recharacterization. The Tax Cuts and Jobs Act ended that. Under 26 U.S.C. 408A(d)(6)(B)(iii), a conversion cannot be recharacterized, and the IRS applies that to conversions made in tax years beginning after December 31, 2017. That is the main reason to convert late in the year, when income is nearly known.

Your first RMD year and after

IRS Publication 590-A says you cannot convert amounts that must be distributed for a year, starting with your first RMD year, and the regulations treat the first dollars out of the IRA each year as the RMD. You can still convert more after that, but the taxable part of the RMD uses up room under your ceiling first. From age 70½, IRA money sent directly to a qualifying charity as a qualified charitable distribution can be excluded from income, up to $111,000 per person for the 2026 tax year; deductible IRA contributions for the year you reach 70½ and later years reduce that exclusion, to the extent they have not already reduced an earlier year's exclusion.

Two five-year clocks

• The qualified distribution clock. A distribution is qualified, and not included in income, only if you are 59½ or older (or another statutory condition applies) and five taxable years have passed since the first tax year for which you made a contribution to a Roth IRA (26 U.S.C. 408A(d)(2)).
• The conversion clock. Each conversion starts its own five-year period. Withdraw converted dollars within that period and the 10% early distribution tax can apply to the taxable amount converted, unless an exception such as age 59½ applies (26 U.S.C. 408A(d)(3)(F) and 72(t)).

Paying the tax

Paying from cash outside the IRA leaves the tax bill the same and keeps more of the converted dollars in the Roth. Tax withheld from the conversion itself never reaches the Roth, is taxable, and can face the 10% additional tax if you are under 59½. The IRS also notes that conversion income may call for higher withholding or estimated tax payments.

If you already receive Social Security, conversion income also counts in the formula that decides how much of your benefit is taxable (26 U.S.C. 86), which makes the years before claiming especially useful.

A conversion cannot be undone, so the number you convert should be the number you meant to convert.

How does a Roth conversion strategy fit with your CPA and the rest of the plan?

Review each year's proposed amount with your advisor and CPA alongside your RMD projection and charitable giving. Anchor provides tax strategy and coordination, not tax preparation or legal advice, so keep your own CPA and attorney for filing and legal decisions. Anchor acts in your best interest. Anchor operates as a fiduciary under the Investment Advisers Act.

For the wider withdrawal picture, see how to reduce taxes on IRA withdrawals.

Frequently asked questions

Is there an age limit on Roth conversions?

No. The conversion rules in 26 U.S.C. 408A(d)(3) set no age requirement. What changes with age is the RMD: starting with your first RMD year (see the birth-year ages above), that year's required distribution cannot be converted.

What is the deadline for a 2026 Roth conversion?

For calendar-year filers, the money has to leave the traditional IRA by December 31, 2026. A direct conversion should be complete by then; with a 60-day rollover, the deposit into the Roth can follow early in 2027. There is no extension into April the way there is for an IRA contribution.

Can I undo a Roth conversion if the market drops?

No. Conversions made in tax years beginning after December 31, 2017 cannot be recharacterized. That is one reason to convert late in the year, once income is nearly known.

Should I convert my whole IRA in one year?

Usually not. A single large conversion stacks everything into one year's brackets. Spreading the same amount across several gap years can keep more of it in lower brackets, though the right split depends on your income, deductions and expected RMDs.

Does a Roth conversion trigger the 10% early withdrawal penalty?

Not on the conversion itself. The 10% additional tax can apply to tax withheld from a conversion if you are under 59½, and to converted dollars withdrawn within five years of the conversion before 59½.

Sources

1. IRS Publication 590-A, Contributions to Individual Retirement Arrangements: conversions included in income for the year converted, no recharacterization of conversions after 2017, RMD amounts cannot be converted, withholding and estimated tax.
2. 26 U.S.C. 408A, Roth IRAs (Cornell Legal Information Institute): no lifetime RMDs, qualified distributions and the five-year period, conversion five-year rule, ordering rules, no recharacterization of conversions.
3. IRS news release IR-2025-103, tax year 2026 inflation adjustments: 2026 bracket thresholds and standard deduction.
4. IRS Revenue Procedure 2025-32, Internal Revenue Bulletin 2025-45, section 3.03: 2026 maximum zero rate amounts for long-term capital gains.
5. IRS Revenue Procedure 2025-32, Internal Revenue Bulletin 2025-45, section 3.14(3): 2026 additional standard deduction for age.
6. IRS, Check your eligibility for the new enhanced deduction for seniors: senior deduction amount, years and phase-out thresholds.
7. 26 U.S.C. 151(d)(5)(C), deduction for seniors (Cornell Legal Information Institute): 6% phase-out rate above the MAGI threshold.
8. 26 CFR 1.401(a)(9)-2(b)(2), applicable age for RMDs (Cornell Legal Information Institute): RMD age 73 for people born 1951 through 1958 and 75 for people born in 1960 or later.
9. 26 CFR 1.408A-4, Q&A-6 and Q&A-7 (Cornell Legal Information Institute): conversion income belongs to the year the money leaves the traditional IRA, basis is not taxed again, and the first dollars distributed in an RMD year are the RMD.
10. IRS Retirement Topics, Required Minimum Distributions (RMDs): RMD starting age of 73; no lifetime RMDs from Roth IRAs or designated Roth accounts.
11. 26 U.S.C. 1411, Net Investment Income Tax (Cornell Legal Information Institute): 3.8% rate, MAGI thresholds, and the exclusion of IRA and Roth IRA distributions from net investment income.
12. Social Security Administration, Medicare Premiums: 2026 IRMAA income thresholds and the tax year used.
13. IRS Retirement Topics, Beneficiary: the 10-year rule and inherited Roth IRAs.
14. 26 U.S.C. 72(t), additional tax on early distributions (Cornell Legal Information Institute): 10% additional tax and the age 59½ exception.
15. 26 U.S.C. 1(h), maximum capital gains rate (Cornell Legal Information Institute): long-term gains and qualified dividends stack on top of ordinary taxable income.
16. 26 U.S.C. 36B(d)(2), household income for the premium tax credit (Cornell Legal Information Institute): the credit is based on modified adjusted gross income.
17. 26 U.S.C. 86, Social Security benefits (Cornell Legal Information Institute): income used to determine how much of a benefit is taxable.
18. 26 U.S.C. 408(d)(2) and (d)(8) (Cornell Legal Information Institute): all IRAs treated as one contract for figuring the taxable part of a distribution; qualified charitable distributions from age 70½ excluded from income, reduced by deductible IRA contributions made after 70½.
19. Internal Revenue Bulletin 2025-49 (Notice 2025-67, 2026 cost-of-living adjustments): $111,000 qualified charitable distribution exclusion limit for 2026.