Roth Conversions: What They Are and How to Strategize Them

By Bob Lobclaw · July 16, 2026

A Roth conversion moves money from a traditional (pre-tax) IRA or 401(k) into a Roth account. You pay ordinary income tax on the amount converted in the year you do it, and in exchange that money — and everything it earns afterward — grows and can eventually be withdrawn completely tax-free. It’s not a way to avoid tax; it’s a way to choose when you pay it, which matters a lot if you expect your tax rate to be different later than it is now.

Why people convert

The core bet behind any conversion is that you’re paying tax at today’s rate instead of a future rate you expect to be higher. That can happen for several reasons: your income is temporarily low, tax law itself could change, or your pre-tax balance is on track to grow so large that Required Minimum Distributions will force out more taxable income later than you actually need. Roth accounts also have no RMDs for the original owner, so converting shrinks the balance the IRS will eventually force you to withdraw. There’s an estate angle too — heirs who inherit a Roth IRA still must empty it within 10 years under current rules, but they do it tax-free, whereas an inherited traditional IRA adds taxable income on top of whatever else they’re earning.

Strategy 1: Fill the bracket, don’t overflow it

The most common approach is converting just enough each year to use up the remaining room in your current tax bracket, without pushing income into the next one. If you’re sitting in the 22% bracket with $15,000 of room left before the 24% bracket starts, you convert $15,000 — not more, not less — and repeat the calculation next year. This is a comparison against your bracket now, not just a fixed dollar target, since brackets shift with inflation and law changes.

Strategy 2: Convert during the low-income gap years

Retirees often have a window — after they stop working but before Social Security and RMDs begin — where taxable income is unusually low. That gap, sometimes just a handful of years in your early-to-mid 60s, is often the cheapest tax rate you’ll ever see again, and it’s the classic time to convert aggressively. The same logic applies to a layoff, a sabbatical, or a low-income year for any other reason — conversions are opportunistic, not just age-based.

Strategy 3: A multi-year conversion ladder

Rather than one large conversion, many people spread a big pre-tax balance across five, ten, or more years, converting a similar amount annually. This avoids dumping so much income into a single year that it spikes you into a much higher bracket or triggers a Medicare IRMAA surcharge, which is based on income from two years prior (see the Medicare cost guide). A ladder also gives you room to adjust each year’s conversion size as your actual income and the tax code change, instead of locking in one irreversible decision on a single year’s numbers.

Strategy 4: The five-year rollover ladder for early access

A different kind of ladder solves a different problem: reaching retirement savings before 59½ without the usual early-withdrawal penalty. Each converted amount has to season for five years (tracked separately, conversion by conversion) before it can be withdrawn penalty-free, so someone converting a slice every year builds a rolling supply of penalty-free money five years out. It’s a common complement to the Rule of 55 for people leaving work well before traditional retirement age.

Strategy 5: Convert more when markets are down

Tax on a conversion is based on the dollar value converted, not the number of shares. When account values drop in a downturn, converting the same dollar amount moves more shares into the Roth — and if the market recovers, that recovery happens entirely inside the tax-free Roth account instead of the still-taxable traditional one. Some people keep a standing plan to convert more aggressively during down years for exactly this reason.

What to watch out for

Conversions are permanent. Recharacterizing a conversion back to pre-tax — undoing it after the fact — was eliminated by the 2017 tax law. Once you convert, that year’s tax bill is locked in regardless of what happens to the account afterward.
Pay the tax from outside money if you can. Using IRA funds to cover the conversion’s tax bill shrinks the amount that actually reaches the tax-free Roth, and if you’re under 59½, that withheld portion can itself be hit with a 10% early-withdrawal penalty. Paying the tax from a taxable brokerage or savings account instead lets the full converted amount grow tax-free.
Watch every income-tested threshold, not just brackets. A conversion raises Adjusted Gross Income, which can affect the taxable portion of Social Security benefits, Medicare IRMAA surcharges, ACA marketplace subsidies, and eligibility for other income-limited breaks — sometimes creating an effective marginal rate well above the stated bracket.
State taxes count too. A conversion is taxable income in most states with an income tax. Some people time large conversions around a move to a no-income-tax state, though state residency rules for the year of the move can be complicated and are worth confirming before relying on this.

The bottom line

There’s no single “right” conversion strategy — the best approach depends on your current bracket, how large your pre-tax balance is projected to grow, how many low-income years you have before Social Security and RMDs begin, and how much you can afford to pay in tax without touching the converted funds themselves. The Roth vs. 401(k) comparison tool models the tradeoff for your own numbers, and the retirement calculator shows how converting changes your projected RMDs and lifetime taxes year by year. The assumptions behind both are documented on the Data & Logic page.

Educational content, not personalized financial advice — see the disclaimer.