Financial Wellness

Roth Conversion in Retirement: How to Save Your Heirs from a Six-Figure Tax Bill

9 min read · Updated March 11, 2026 · By Carla Garcia, Founder · Fact Checked

Roth conversion retirement — couple in their 60s planning tax strategy with spreadsheets at kitchen island

Quick Answer

A Roth conversion moves money from a traditional IRA (taxed when withdrawn) to a Roth IRA (tax-free forever). Less than 4% of IRA owners convert in any given year, leaving $30 trillion in pre-tax accounts that will eventually face taxation. The TCJA brackets are now permanent after the OBBBA in July 2025, but current rates are still historically low compared to the 39.6% top rate before 2018.

With $36 trillion in national debt and Social Security insolvency projected by 2032, future rate increases are probable. The biggest urgency is the SECURE Act 10-year rule: heirs must deplete inherited traditional IRAs within 10 years, potentially facing a $320,000 tax bill on a $1 million inheritance. Converting now at your rate (12-24%) instead of your heirs' rate (32-37%) is the core strategy.

Key Takeaways

1 Less than 4% of IRA owners do Roth conversions in any given year, despite $30 trillion sitting in pre-tax accounts waiting to be taxed 1.
2 The TCJA tax brackets are now permanent (OBBBA, July 2025), but current rates remain historically low and $36 trillion in national debt makes future increases probable 2.
3 The SECURE Act 10-year rule forces heirs to deplete inherited traditional IRAs within a decade, potentially creating a $320,000 tax bill on a $1M inheritance 3.
4 The "gap years" between retirement and age 73 (when RMDs begin) are the optimal window for conversions at the lowest possible tax rate.
5 Converting too much in one year can trigger IRMAA surcharges ($11,688/year at the highest tier) two years later 4.

Why This Matters

$30 trillion sits in traditional IRAs and employer plans. Every dollar will be taxed when withdrawn, and RMDs force withdrawals starting at age 73 1.
The OBBBA made TCJA brackets permanent but added $4.4 trillion to the deficit over ten years. Net interest payments will surpass $1 trillion in 2026 2.
Social Security is projected to be insolvent by 2032, potentially cutting benefits by 28%. Roth income does not count toward the provisional income formula that taxes Social Security benefits 5.
The "tax torpedo" zone creates effective marginal rates of 40-46% for retirees with traditional IRA withdrawals, far higher than the stated bracket 5.

Key Facts

Average Baby Boomer IRA balance: $257,002. Average 401(k) balance: $146,400. Combined, most retirees have $400,000+ in pre-tax accounts 1.
2026 married filing jointly 22% bracket ceiling: $211,400 in taxable income. A couple with $50,000 in other income can convert $161,400 and stay in the 22% bracket 2.
IRMAA surcharges start at $109,000 MAGI (single) / $218,000 (married). A large conversion in 2024 triggers higher Medicare premiums in 2026, two years later 4.
A new Senior Deduction of $6,000 per person ($12,000 couple) is available 2025-2028 only, but phases out above $75,000 MAGI (single) / $150,000 (joint) 2.
Converting $200,000 from traditional to Roth before age 73 reduces first-year RMDs by approximately $7,550, a reduction that grows every year as the IRS divisor shrinks 3.

2026 Tax Brackets (Married Filing Jointly, Post-OBBBA)

Tax Rate	Taxable Income Range	Roth Conversion Room (Couple, $50K Other Income)
10%	Up to $24,800	Already filled by other income
12%	$24,801 - $100,800	$50,800 of conversion room
22%	$100,801 - $211,400	$110,600 of additional room
24%	$211,401 - $403,550	$192,150 of additional room
32%	$403,551 - $512,450	Generally too expensive for conversions
35-37%	$512,451+	Rarely recommended for conversions

Source: IRS 2026 Tax Inflation Adjustments, Tax Foundation

Retirement Wellness Gaps: What Generic Roth Guides Miss

What They Tell You	What They Miss	Why It Matters
Convert before brackets sunset	TCJA is now permanent (OBBBA July 2025)	The urgency shifted from sunset to debt trajectory
Pay taxes now, save later	A conversion can trigger IRMAA, eliminate the senior deduction, and make Social Security 85% taxable	Hidden effective rates can exceed 50%
Your heirs will thank you	The SECURE Act forces 10-year depletion at the heirs peak earning years	A $1M inherited traditional IRA = $320,000 in taxes for heirs in the 32% bracket
Just fill your bracket	State taxes (up to 13.3%), SALT cap, and ACA subsidy cliff multiply the cost	Converting in a no-income-tax state saves 5-13% on every dollar
You cannot undo it	Recharacterization was eliminated in 2018	Wait until October-December when income is clearer before converting

Step by Step: What to Do

Step 1: Identify Your Gap Years Window

The optimal conversion window is between retirement (when earned income drops) and age 73 (when RMDs begin forcing taxable income higher).
If you have not yet claimed Social Security, your taxable income may be at its lowest point in decades.
Map your projected income for each gap year: pensions, Social Security (if claimed), rental income, and other sources.
The remaining space between your income and your target bracket ceiling is your annual Roth conversion room.

Step 2: Calculate Your Bracket-Filling Conversion Amount

Start with the 2026 bracket ceiling for your filing status (e.g., $211,400 for married filing jointly at 22%).
Subtract your standard deduction ($32,200 married) and all other projected taxable income.
The result is the maximum you can convert while staying in your target bracket.
Example: A married couple with $50,000 in pensions and Social Security can convert roughly $129,200 and stay in the 22% bracket after the standard deduction 2.

Step 3: Watch the IRMAA and Social Security Triggers

IRMAA uses income from two years prior. A 2026 conversion affects 2028 Medicare premiums 4.
The first IRMAA cliff at $218,000 (married) adds $81.20/month per person to Part B premiums, or $1,949/year for a couple.
Social Security becomes 85% taxable above $44,000 in provisional income (married). The "tax torpedo" zone creates effective rates of 40-46% 5.
If possible, complete large conversions at least 3 years before Medicare enrollment at 65.

Step 4: Pay Taxes from Outside the IRA

If you convert $100,000 and pay the $22,000 tax from the IRA, only $78,000 goes into the Roth, losing decades of tax-free growth.
Always pay conversion taxes from a taxable brokerage account, savings, or checking account.
If you are under 59 and a half, using IRA funds to pay taxes triggers an additional 10% early withdrawal penalty on that amount.
Vanguard's research shows that paying taxes externally significantly lowers the break-even rate for conversions to be beneficial 1.

Step 5: Execute Multi-Year, Not One-Time Conversions

Converting $500,000 in one year pushes you into the 35-37% bracket and triggers maximum IRMAA.
Converting $100,000 per year over 5 years keeps you in the 22-24% bracket and may avoid IRMAA entirely.
Wait until October-December each year to convert, when you have a clearer picture of your actual annual income.
Recharacterization (undoing a conversion) was eliminated in 2018. Every conversion is permanent 1.

Real-World Example

Michael and Janet, 63

$1.4M in traditional IRAs, pension of $48K/year, want to protect two adult children from inherited IRA tax bomb

Our advisor says to just take RMDs when the time comes. But our kids both earn $180,000 and I read they only get 10 years to empty the accounts now.

Grace

Your advisor is focused on minimizing your taxes today. But the math changes when you factor in your children. At their income level, inheriting $1.4 million in traditional IRAs means $336,000 in taxes over 10 years. You can convert that same money at 22% instead of them paying 32%.

So we pay $200,000 now to save our kids $336,000 later? That is a $136,000 net savings for the family?

Financial Wellness Plan

Your gap years from 63 to 72 are a once-in-a-lifetime conversion window. No RMDs, no Social Security, low bracket. Let us use every year of it.

1

Map the 22% bracket ceiling each year and calculate maximum conversion room
This week
2

Set up annual Roth conversion of $130,000 (October each year for income clarity)
Start October 2026
3

Coordinate with CPA on IRMAA timing to avoid Medicare premium spikes
Before age 63 conversion

Outcome: Michael and Janet began converting $130,000 per year at 22%. Over 7 gap years, they converted $910,000 to Roth, paying $200,200 in taxes. Their two children will inherit the Roth IRAs tax-free, saving the family approximately $135,800 compared to the inherited traditional IRA path.

Grace built this plan in one conversation. Start yours.

From Grace

Here is what I want you to understand about Roth conversions.

This is not about whether you should convert. With $36 trillion in national debt and Social Security insolvency by 2032, the question is how much and when.
The gap years between retirement and RMDs are the lowest tax rates most people will ever see again. Every year you wait is a year of conversion room you lose permanently.
I can model your specific numbers: your brackets, your IRMAA exposure, your heirs' tax brackets, and the exact multi-year plan that minimizes total family taxes. That is what conversational AI is built for.

Grace is an AI educational tool, not a licensed financial advisor. This content is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified professional for decisions specific to your situation.

Ask Grace to Model Your Roth Conversion Strategy

Frequently Asked Questions

Is a Roth conversion worth it in 2026 now that TCJA is permanent? +

Yes, for most retirees in the 12-24% bracket. The OBBBA made TCJA rates permanent, removing the sunset urgency but not the strategic value. Current rates are historically low (37% top rate vs 39.6% pre-TCJA and 70% in 1980). With $36 trillion in national debt, $1.9 trillion annual deficits, and Social Security insolvency projected by 2032, future rate increases are probable. Converting now locks in a known tax rate.

How much should I convert to Roth each year? +

Convert enough to fill your current tax bracket but not spill into the next one. For a married couple with $50,000 in other income (after standard deduction), you can convert roughly $129,200 and stay in the 22% bracket. Going over triggers 24% on every additional dollar. Wait until October-December when your annual income is clearer, and coordinate with IRMAA thresholds to avoid Medicare premium spikes.

Does a Roth conversion affect my Medicare premiums? +

Yes, two years later. IRMAA uses your Modified Adjusted Gross Income from two years prior. A $150,000 conversion in 2026 could push your 2028 Medicare Part B premium from $202.90 to $365.30 per month. For a couple, that is an extra $3,888/year. The strategy is to stay within IRMAA thresholds or accept the temporary surcharge knowing that Roth income in future years will not trigger IRMAA.

What is the SECURE Act 10-year rule for inherited IRAs? +

Most non-spouse beneficiaries who inherit a traditional IRA after 2020 must withdraw the entire balance within 10 years. If the original owner had started RMDs, the heir must also take annual distributions during that period. For a child earning $180,000 who inherits $1 million, this forces roughly $100,000 per year in additional taxable income at their peak earning rate (potentially 32-35%). Converting to Roth before death eliminates this because inherited Roth IRAs are tax-free.

Can I undo a Roth conversion if I convert too much? +

No. Recharacterization of Roth conversions was permanently eliminated by the Tax Cuts and Jobs Act starting in 2018. Every conversion is final and cannot be reversed. This is why financial advisors recommend waiting until late in the year (October through December) to convert, when you have a much clearer picture of your total annual income. Converting in January based on projected income is risky.

Financial Wellness Required Minimum Distributions Explained Read article → Financial Wellness IRMAA: The Medicare Surcharge That Surprises High Earners Read article → Financial Wellness Creating Your Retirement Paycheck Read article →

Quick Topics

Financial Wellness Required Minimum Distributions The IRS wants its share. Here is how it works. Financial Wellness The Roth Conversion Window A narrow opportunity to reduce your future tax burden. Financial Wellness The IRMAA Surcharge Higher income in retirement can raise your Medicare premiums. Financial Wellness Your Tax Bracket in Retirement Retirement does not mean the end of taxes. But you have more control.

Sources

[1] Investment Company Institute, Quarterly Retirement Market Data Q3 2025 (accessed March 11, 2026)
[2] Tax Foundation, 2026 Tax Brackets and One Big Beautiful Bill Act (accessed March 11, 2026)
[3] Charles Schwab, Inherited IRA Rules and SECURE Act Changes (accessed March 11, 2026)
[4] Kiplinger, Medicare Premiums 2026: IRMAA Brackets (accessed March 11, 2026)
[5] Fidelity Investments, The Social Security Tax Torpedo (accessed March 11, 2026)

Educational content only. This is not financial, tax, or legal advice. Consult a qualified professional for guidance specific to your situation.