Roth IRA Conversion: 3 Times It Actually Makes Sense in 2026
Let me start with the one scenario where a Roth conversion feels almost like cheating—when you know your tax rate later will be higher than it is now. I’ve sat with dozens of clients who assumed they’d be in a lower bracket in retirement, only to realize their pension, Social Security, and Required Minimum Distributions (RMDs) would actually push them higher. A Roth conversion lets you pay taxes today at your current rate and then never worry about Uncle Sam taking another bite. The key is identifying whether you’re in that sweet spot where future rates will exceed today’s.
Why the 2026 tax-bracket sunset matters
The Tax Cuts and Jobs Act (TCJA) is set to expire at the end of 2025, meaning 2026 will likely see higher tax brackets across the board unless Congress acts. For example, the 22% bracket today will revert to 25%, and the 24% bracket will jump to 28%. If you’re in the 22% bracket now and expect to stay there—or even drift higher—converting before January 2026 locks in today’s lower rates. I’ve seen planners call this a “window of opportunity,” and it’s one of the few times the IRS actually gives you a choice: pay now or pay more later.
How to estimate your retirement tax rate
To decide if the conversion makes sense, start with a simple projection. List your expected retirement income: Social Security (85% may be taxable), any pension, rental income, and—most importantly—future RMDs from your traditional IRA. RMDs begin at age 73 (soon 75) and can be surprisingly large. For instance, a $500,000 traditional IRA may require a $19,000 withdrawal in the first year, and that grows each year. Add that to your other income, and you might land in the 24% or 32% bracket. Compare that to your current marginal rate. If today’s 22% is lower than your projected 24% or 28%, converting now is a smart move.
Real-world example: A mid-career saver in the 24% bracket
Take Sarah, a 45-year-old engineer earning $120,000 a year. She’s in the 24% bracket now but expects a pension of $40,000 annually starting at 65, plus Social Security of $30,000. With a traditional IRA balance of $300,000, her RMDs will push her taxable income well above $90,000, landing her in the 28% bracket post-TCJA sunset. By converting $50,000 this year, she pays 24% instead of 28%—saving $2,000 in taxes immediately. Over 20 years, that compounds to meaningful savings. It’s not a guarantee, but the math favors her.
2. You Have a Low-Income Year (and Can Fill the Lower Brackets)
Here’s a scenario I’ve lived through personally: after leaving a corporate job to freelance, I had a year where my income dropped to just $40,000. That’s when I realized the power of a low-income year for a Roth conversion. If you’re in a temporary dip—due to job loss, a sabbatical, early retirement, or a business loss—you can convert at the 10% or 12% bracket rather than the 22% or 24% you might pay later. It’s like buying tax-free growth on a discount.
The strategy: Convert up to the top of your current bracket
The trick is to convert only enough to stay within your current marginal bracket. For 2025, the 12% bracket covers income up to $47,150 for single filers and $94,300 for married couples. If your regular income is $30,000, you could convert up to $17,150 and still pay just 12%. Going beyond that pushes you into the 22% bracket, which defeats the purpose. I usually recommend converting in chunks over several low-income years if possible.
Watch out for the Medicare IRMAA surcharge
One hidden trap: the extra income from a conversion can bump up your Medicare Part B and Part D premiums two years later, especially if you’re 63 or older. The Income-Related Monthly Adjustment Amount (IRMAA) kicks in when your modified adjusted gross income (MAGI) exceeds $106,000 (single) or $212,000 (married) in 2025. Even a $10,000 conversion could push you over that threshold, costing you hundreds in extra premiums for a year. Always check the IRMAA brackets before converting if you’re near Medicare age.
Example: A sabbatical year in 2026
Consider a teacher named Mark who takes a one-year sabbatical in 2026, with no income other than $20,000 from part-time work. He’s married with a spouse earning $40,000, so their total income is $60,000. They can convert up to $34,300 ($94,300 minus $60,000) and pay just 12% on that conversion. If Mark doesn’t convert, that money stays in a traditional IRA, later taxed at 22% or higher. The savings? Roughly $3,430 in taxes on that conversion alone.
3. You Want to Minimize RMDs or Leave a Tax-Free Inheritance
This is the long-game reason that often gets overlooked. If you’re worried about the “RMD tax torpedo”—where forced withdrawals push you into higher brackets—or if you want to leave a tax-free gift to your kids, a Roth conversion is your best tool. I once helped a retired couple who had $800,000 in traditional IRAs, and their RMDs alone generated $30,000 in taxable income, pushing them into the 24% bracket. Converting a portion reduced their RMDs and saved them thousands over their lifetimes.
How RMDs can push you into higher brackets
Let’s say you’re 72 with a $600,000 traditional IRA. Your first RMD is about $23,400, and it grows each year. Add that to Social Security of $40,000 and a small pension of $15,000, and your taxable income hits $70,000-plus—well into the 22% bracket. After the TCJA sunset, that could be 25%. By converting $50,000 now at 22%, you reduce future RMDs and keep your retirement income in the 12% bracket. It’s a direct hedge against forced high taxes.
Leaving a Roth IRA to heirs: the stretch advantage
Under the SECURE Act, most non-spouse heirs must empty an inherited IRA within 10 years. For a traditional IRA, those withdrawals are taxable as ordinary income, potentially pushing your kids into high brackets. A Roth IRA, on the other hand, is entirely tax-free for heirs. So if you want to leave a legacy without burdening your beneficiaries with a tax bill, converting to Roth is a no-brainer. Just remember: you pay the taxes now, but they don’t.
When not to convert: you expect to need the money soon
Conversion isn’t always right. If you think you’ll need the funds within five years—say for a house down payment or emergency—the 10% early withdrawal penalty on converted amounts can wipe out the tax savings. Also, if you’re in a low bracket now but expect to be in an even lower bracket later (e.g., due to high medical deductions), converting might backfire. Always model the timeline.
4. The Often-Overlooked Detail: The 5-Year Rule
I’ve seen more than a few people trip over the 5-year rule. It’s not one rule—it’s two, and confusing them can cost you. The first applies to the Roth IRA account itself: you must wait five years from your first Roth contribution to withdraw earnings tax-free. The second applies to each conversion: you must wait five years from the conversion date to withdraw the converted amount penalty-free. If you’re under 59½ and need the money before five years, you could owe a 10% penalty.
Conversion 5-year rule vs. account-opening 5-year rule
Think of it this way: the account-opening rule affects earnings only, while the conversion rule affects the principal you converted. For example, if you opened a Roth IRA five years ago and convert $10,000 today, you can withdraw the $10,000 penalty-free after five years (conversion rule). But any earnings on that $10,000 are subject to the account-opening rule—so they’re tax-free only if you’re 59½ or wait five years from the account opening. It’s confusing, but the IRS ordering rules help: conversions come out first, then contributions, then earnings.
Practical tip: Track your conversion years separately
I keep a simple spreadsheet with the date and amount of each conversion. If I need to take a withdrawal before 59½, I can see which conversions have passed their five-year mark. The IRS doesn’t require this, but it’s a lifesaver for avoiding penalties. Also, note that if you convert a large amount, the five-year clock resets for that chunk—so don’t assume all your money is accessible.
Final takeaway: A Roth IRA conversion isn’t for everyone, but in 2026—with tax brackets set to rise—it’s worth a serious look. Focus on the three scenarios where it truly shines: higher future tax rates, low-income years, and RMD or inheritance planning. Run your numbers, check the 5-year rules, and convert with confidence. If you’re still unsure, a fee-only planner can guide you through the math. And if you found this helpful, consider bookmarking it for your next tax-planning session.