Few strategies in retirement planning generate as much discussion — or as much confusion — as the Roth IRA conversion.
Used wisely, a Roth conversion can meaningfully improve your long-term financial picture. Used carelessly, it can trigger an unexpected tax bill, higher Medicare premiums, and greater taxation of your Social Security benefits.
In this article, we walk through the essential considerations so you can approach this topic as an informed participant in your financial plan.
What Is a Roth Conversion?
A Roth conversion involves moving money from a tax-deferred account — such as a traditional IRA, 401(k), or 403(b) — into a Roth IRA.
The key trade-off is straightforward: you pay ordinary income tax on the amount converted today, in exchange for tax-free growth and tax-free withdrawals in the future.
Unlike a traditional IRA, a Roth IRA is not subject to required minimum distributions (RMDs) during the account owner’s lifetime, and qualified distributions are entirely income tax-free.
Anyone can execute a Roth conversion, regardless of income level. This is an important distinction: while high earners are prohibited from contributing directly to a Roth IRA above certain income thresholds, there is no income limit on conversions.
The Long-Term Case for Roth Conversions
The merits of Roth conversions are most compelling when viewed through a long-term lens. Here is why:
- Tax-free compounding. Once funds are in a Roth IRA, all future growth is sheltered from income tax. For accounts that have decades to compound, this can translate into a substantially larger tax-free inheritance for you and your heirs.
- RMD reduction. Traditional IRAs and pre-tax 401(k)s require you to take minimum distributions beginning at age 73, whether you need the money or not. These distributions are taxable as ordinary income, which can push you into higher tax brackets, increase the taxation of your Social Security benefits, and trigger higher Medicare premiums. Converting a portion of your pre-tax accounts to Roth reduces the size of your future RMDs — and the tax drag that comes with them.
- Tax diversification. Having both taxable and tax-free income sources in retirement gives you far more flexibility to manage your tax bracket from year to year. Rather than being forced to draw entirely from taxable accounts, you can blend Roth withdrawals with other income to stay below critical thresholds.
- Legacy planning. Roth IRAs can be powerful estate planning tools. Heirs who inherit Roth accounts receive income-tax-free assets, which can be especially valuable if they are in high tax brackets themselves.
- Protection against future tax rate increases. Current federal income tax rates are historically moderate. Many financial planners believe rates will need to rise in the future to address long-term fiscal pressures. Converting at today’s rates locks in your tax bill before potential future increases.
When Are Roth Conversions Most Beneficial?
Timing is everything with Roth conversions. The goal is always to convert at the lowest possible tax cost. The following windows tend to be most advantageous:
- The “gap years” — between retirement and age 73. This is the single most powerful window for most clients. If you retire at 62 or 65 but delay Social Security and have not yet begun RMDs, your taxable income may be the lowest it will ever be for the rest of your life. This creates an opportunity to fill up lower tax brackets — such as the 12% or 22% bracket — with conversion income before RMDs, Social Security, and other income layers crowd that space out permanently.
- Before Social Security begins. As we explain in more detail below, once Social Security begins, each dollar of Roth conversion income can cause additional Social Security benefits to become taxable. Converting before benefits begin avoids this compounding tax effect.
- Low-income years. A job loss, sabbatical, business down year, or large deductible expense (such as significant medical costs) can create a temporary window where your income is unusually low. These are excellent conversion opportunities.
- After a market decline. If your IRA has declined in value, converting at the lower balance means paying tax on a smaller amount. When the market recovers, those gains accumulate tax-free inside the Roth.
- Before ages 63–64 (for those approaching Medicare). Because Medicare uses a two-year lookback to determine your income-related surcharges (IRMAA — explained below), front-loading conversions before age 63 or 64 can reduce or eliminate future IRMAA exposure. Once you are on Medicare, large conversions must be carefully calibrated to avoid crossing IRMAA brackets.
The Social Security “Crowding Out” Issue
One of the most underappreciated complications of Roth conversions is their interaction with Social Security benefits. This is an important point for clients who are receiving Social Security but with little or no other income.
A Roth conversion amount gets added directly to Adjusted Gross Income, which impacts whether Social Security benefits are taxed at 0%, 50%, or 85%.
When you receive Social Security, the IRS uses a figure called provisional income (also known as “combined income”) to determine how much of your benefit is taxable.
Provisional income includes your adjusted gross income, any tax-exempt interest, and half of your Social Security benefit. If this figure exceeds $25,000 for a single filer or $32,000 for a married couple, a portion of your Social Security becomes taxable — up to 85% at higher income levels.
Here is where conversions become costly after Social Security begins: each dollar you convert to a Roth increases your provisional income, which in turn can cause more of your Social Security benefit to become taxable.
The result is a compounding tax effect — you are effectively taxed on both the conversion amount and on an increased share of your Social Security benefit.
The practical implication: For most clients with significant pre-tax IRA balances, the highest-value Roth conversions happen before Social Security begins, during those “gap years” when income is lower and provisional income is easier to manage.
Once Social Security is in payment, conversions can still make sense, but the amounts should be modeled carefully to avoid triggering this compounding effect inadvertently.
Roth Conversions and Medicare IRMAA
If you are on Medicare — or approaching it — Roth conversions require an additional layer of analysis because of the Income-Related Monthly Adjustment Amount (IRMAA).
IRMAA is a surcharge added to your Medicare Part B and Part D premiums when your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds.
For 2026, IRMAA surcharges begin at $109,000 MAGI for single filers and $218,000 for married couples filing jointly. The surcharges operate on a tiered “cliff” structure, meaning that crossing a threshold by even one dollar can increase your annual Medicare premiums significantly.
The two-year lookback. The critical planning wrinkle is that your 2026 IRMAA is based on your 2024 income — not your current income. This two-year lag means that a large Roth conversion you execute today will not affect your Medicare premiums for another two years.
Conversely, a large conversion you did two years ago may be triggering higher premiums right now.
The numbers are real. In 2026, the IRMAA surcharge for Part B can range from an additional $81.20 to $487.00 per person per month, depending on income tier.
For a married couple both on Medicare, a conversion that pushes income into the next IRMAA bracket could cost more than $1,000 in additional annual Medicare premiums per person — sometimes negating much of the tax benefit of the conversion itself.
What this means for planning. The goal is not to avoid Roth conversions out of fear of IRMAA — it is to convert strategically, staying below IRMAA thresholds where possible, and in amounts that optimize the long-term benefit against the near-term premium cost.
Once Roth conversions are complete and your RMDs are reduced (or eliminated), future Roth withdrawals do not count toward MAGI at all, which can dramatically reduce your long-term IRMAA exposure.
The short-term surcharge, properly weighed, may well be worth the long-term premium savings.
When a Roth Conversion Is Not Recommended
As valuable as this strategy can be, Roth conversions are not universally beneficial. Here are the situations where we would typically advise caution or decline to recommend a conversion:
- Your tax rate today is higher than you expect in retirement. If you are currently in a high bracket and expect significantly lower income in retirement, deferring taxes makes more sense. Pay taxes later at a lower rate, not more taxes now at a higher one.
- You cannot pay the tax with outside funds. The best Roth conversions are funded with non-retirement assets — money in a taxable brokerage account or savings — used to pay the tax bill. If you would need to withdraw additional funds from your IRA to cover the tax, the conversion becomes far less efficient and potentially counterproductive.
- You have a short time horizon. Roth conversions take time to deliver their benefits. If you are in poor health, have a limited life expectancy, or need the funds in the near term, the upfront tax cost may not be recouped.
- The conversion would trigger an IRMAA tier jump that outweighs the benefit. If a conversion amount would push you over an IRMAA cliff — adding thousands in Medicare premiums over multiple years — the math may not work in your favor, particularly for smaller conversion amounts.
- The conversion would make a greater portion of Social Security taxable. As discussed above, if you are already receiving Social Security and a conversion would significantly increase the taxable portion of your benefit, the effective tax rate on the conversion may be far higher than it appears.
- You expect to leave assets to charity. If your primary beneficiary is a charitable organization, keeping funds in a traditional IRA may be preferable — charities pay no income tax on inherited IRAs, so the tax deferral benefits accrue to a tax-exempt entity rather than generating a tax bill for you today.
A Note on Process
Roth conversions require careful coordination between your financial plan and your tax return.
At Moore Financial Advisors, we use financial planning software to model conversion scenarios across multiple years, analyzing the interplay between your tax brackets, RMDs, Social Security, IRMAA, and investment returns.
We recommend working in close collaboration with your CPA or tax advisor, because the final conversion decision and execution must be informed by your complete tax picture for the year.
If you have not recently discussed Roth conversion opportunities with us — particularly if you are approaching retirement or newly retired and have significant pre-tax retirement assets — we encourage you to reach out.
The window for the most tax-efficient conversions is finite, and early, thoughtful planning is far more powerful than later-stage adjustments.