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Many of you have asked whether you should move money from a Traditional IRA into a Roth IRA before required withdrawals begin. There is no one-size-fits-all answer, but for most people the decision comes down to seven numbers. This memo explains each one in plain terms so you can see where you stand before we talk. Bracketed numbers point to the sources listed at the end.

First: What Is a Roth Conversion?

A Roth conversion means moving money from a Traditional IRA (taxed when you take it out) into a Roth IRA (never taxed again). You pay income tax on the amount you convert in the year you do it. In exchange, that money and all its future growth can come out tax-free for you and your heirs.

Think of it this way: you are choosing to pay tax on your terms, at a rate you know today, rather than waiting and letting the IRS decide when and at what rate you pay later.

Why Consider a Conversion?

  • Pay tax at a rate you know. The 2025 tax law made today’s brackets permanent, so no rate increase is scheduled [1]. The stronger reason to convert is that your own rate may rise later, for the reasons below.
  • Shrink future required withdrawals. Traditional IRAs force you to take money out starting at age 73 or 75, whether you need it or not [9]. Converting now makes those future withdrawals smaller.
  • Tax-free growth and flexibility. Roth IRAs have no required withdrawals for you during your lifetime, and qualified withdrawals are tax-free [10].
  • Protect a surviving spouse. When one spouse passes away, the survivor usually files as single and faces higher tax rates on similar income [1]. Converting while you are both living can ease that burden.
  • Leave a better inheritance. Your children receive tax-free money rather than a tax bill [10].

The key is converting the right amount: enough to make a difference, but not so much that you trigger higher taxes or costs elsewhere. That is where the seven numbers come in.

Part 1: How Much Can You Convert?

1. Your “12% ceiling”

This is how much total income you can have in 2026 and still stay in the 12% federal tax bracket, one of the lowest available:

Filing Status Under Age 65 Age 65 and Older
Married, filing jointly $133,000 $148,300
Single $66,500 $74,550

Each figure is the top of the 12% bracket ($100,800 for couples, $50,400 for singles) plus the 2026 standard deduction ($32,200 / $16,100) [1]. The 65+ column also adds the extra age-65 deduction ($1,650 per spouse, $2,050 for singles) [1] and the new $6,000 senior deduction per person [2]. The 65+ couple figure assumes both spouses are 65 or older.

In plain terms: Take the number for your situation and subtract the income you already have coming in (pension, interest, dividends, the taxable part of Social Security). What’s left is roughly how much you could convert at 12%.

Example: A married couple, both 65, has $90,000 of income. Their conversion room at 12% is about $58,300 ($148,300 – $90,000).

Watch out: Social Security can shrink this room. Up to 85% of your benefits become taxable once “provisional income” (half your benefits plus all other income, including tax-exempt interest) passes $44,000 for couples or $34,000 for singles [4]. A conversion raises provisional income, so each converted dollar can pull up to 85 cents of benefits into taxable income with it. Unless 85% of your benefits are already taxable, your real room at 12% may be well below the simple subtraction, and the true cost of that slice can approach 22% (12% × 1.85). We will run this calculation for you.

Watch out: capital gains can lose their 0% rate. In 2026, qualified dividends and long-term gains are taxed at 0% while taxable income stays at or below $98,900 for couples or $49,450 for singles [1]. Conversion income is counted first, so it can push those gains into the 15% rate. In that zone, each converted dollar can cost about 27 cents (12% on the conversion plus 15% on the gain it displaces).

2. $150,000: The senior bonus deduction limit

Starting in 2025, people 65 and older get an extra $6,000 tax deduction each, on top of the existing age-65 deduction [2]. It starts shrinking once modified adjusted gross income passes $150,000 for couples ($75,000 for singles), and it goes away entirely after 2028 [2]. Married couples must file jointly to claim it, and each person needs a valid Social Security number [2].

The phase-out is steep for couples: each spouse’s $6,000 shrinks by 6% of income above $150,000, so a couple where both are 65+ loses 12 cents of deduction per extra dollar and the bonus is gone at $250,000 [3].

In plain terms: If you are 65+, 2026 through 2028 is a special window with a little extra room to convert at low rates. Staying under $150,000 keeps the full bonus.

3. Two years: Medicare’s look-back

Medicare sets your premiums based on your income from two years earlier: 2026 premiums generally use your 2024 tax return [6]. Income you report at age 63 affects your Medicare bill at age 65.

In plain terms: If you are 62 or younger, Medicare costs don’t need to factor into this year’s conversion. If you are 63 or older, they do. See number 4.

4. $218,000: The Medicare surcharge line (where people get burned)

If your income goes above $218,000 for couples ($109,000 for singles), Medicare adds a surcharge to your premiums [5]. This is a cliff, not a gradual increase. Going just $1 over adds $81.20 a month to Part B and $14.50 a month to Part D for each person, about $2,300 a year for a couple [5].

Watch out: Medicare counts tax-free municipal bond interest as income, even though the IRS doesn’t tax it [6].

These are the 2026 lines. A 2026 conversion will be measured against the thresholds for 2028 premiums, which are adjusted for inflation and not yet published. Using $218,000 / $109,000 is the conservative choice until then.

A conversion can’t be appealed away. Social Security will reconsider the surcharge after certain life-changing events, such as retiring or losing a spouse, but a Roth conversion is not one of them [6].

The sweet spot: For a couple 65+, income between $148,300 and $218,000 falls in the 22% bracket but stays below the surcharge [1][5]. Because the senior deduction is phasing out in this range, the effective rate is closer to 24.6% for a couple where both are 65+ (about 23.3% if only one is) [3]. This is still where larger conversions often make sense.

In plain terms: Treat $218,000 (couples) or $109,000 (singles) as a hard ceiling unless we’ve decided together that crossing it is worth it.

5. The health insurance cliff (if you retire before 65)

The extra marketplace subsidies of 2021–2025 expired at the end of 2025, so the subsidy cliff is back for 2026: households above 400% of the poverty line get no premium help at all [8][13]. For 2026 coverage that line is $84,600 for couples and $62,600 for singles; for 2027 coverage it rises to about $86,560 and $63,840 [7][8]. The marketplace counts all of your Social Security, including the untaxed part, and your municipal bond interest toward that total [7].

In plain terms: Early retirees on marketplace coverage often convert small amounts until Medicare begins at 65, then convert more. (Subsidy rules have changed often and Congress could act again, so we will confirm the current limits with you.)

Part 2: Should You Convert?

6. Age 73 or 75: When forced withdrawals begin

Year You Were Born Withdrawals Begin At
1951 – 1959 Age 73
1960 or later Age 75

These ages come from the SECURE 2.0 Act as implemented in the IRS’s 2024 final regulations [11]. (For people born in 1959 the statute was ambiguous; the IRS has proposed treating them as age 73 [11].)

Once these required minimum distributions (RMDs) start, the IRS sets the amount by dividing your prior year-end balance by a life-expectancy factor [10]. For example, the factor at age 73 is 26.5, so a $1.2 million IRA requires about $45,300 in the first year, on top of Social Security [10]. The factor shrinks every year, so the required percentage rises.

In plain terms: The years between retirement and your RMD age are often your best chance to convert at low rates, before forced withdrawals push your income higher.

7. Ten years: The rule for your heirs

Most children who inherit an IRA must empty it by the end of the tenth year after your death [9][10]. Spouses, minor children, disabled or chronically ill heirs, and heirs within 10 years of your age get more flexible rules [9]. If you had already started RMDs, a non-spouse heir must also take annual withdrawals in years one through nine [11]. If they inherit during their peak earning years, those withdrawals are taxed at their (often higher) tax rate, not yours.

In plain terms: If you convert now, your children inherit a Roth IRA instead. The 10-year deadline still applies, but qualified withdrawals are tax-free and no annual withdrawals are required along the way [10][11].

A Few Other Things to Keep in Mind

  • Pay the tax from savings, not the IRA, when you can. Every dollar used for tax is a dollar that doesn’t grow tax-free in the Roth. If you are under 59½, money taken from the IRA to pay the tax can also trigger a 10% penalty [10].
  • If you are 59½ or older, withholding is a useful alternative. You can have tax withheld from the conversion itself, like a normal IRA distribution. The trade-off is a smaller Roth. The advantage is timing: the IRS treats withholding as paid evenly through the year, even if it happens in December, which can head off underpayment penalties [12].
  • Conversions can’t be undone. Since 2018, a Roth conversion can no longer be reversed (“recharacterized”) [10]. That’s why we usually finalize amounts late in the year, once your income is clearer.
  • Plan for the tax bill. A large conversion may require an estimated tax payment. You generally avoid a penalty if withholding and estimated payments cover at least 90% of this year’s tax or 100% of last year’s (110% if last year’s income was over $150,000) [12].
  • State taxes matter. Your state’s tax today versus where you plan to retire can tip the decision.
  • Five-year rules. Roth accounts have waiting periods for certain tax-free withdrawals, especially if you are under 59½ [10].

Next Steps

The right conversion amount depends on your specific income, age, health coverage, and goals. Before year-end, we recommend reviewing:

  • Your expected 2026 income from all sources, including how much of your Social Security is already taxable
  • Any qualified dividends or capital gains you expect this year
  • Your current and future Medicare or health insurance situation
  • Cash available outside your IRA to pay the conversion tax
  • Your goals for your spouse and heirs

We can run the numbers, and your tax professional should verify them. This is a good conversation to have before year-end. Reach out to your advisor if you have any questions or would like to run the numbers.

This memo is for educational purposes only and is not individual tax, legal, or investment advice. Figures reflect 2026 federal rules as published by the sources below and are subject to change. Please consult your tax professional before making any conversion.

Sources

All pages accessed October 8, 2026.

  1. Internal Revenue Service, Revenue Procedure 2025-32: 2026 tax brackets, standard deduction, age-65 additional deduction, and 0% capital gains thresholds (sections 2.01, 4.01, 4.03, 4.14).
  2. Internal Revenue Service, Fact Sheet FS-2025-03: Tax deductions for working Americans and seniors: $6,000 senior deduction, 2025–2028, income limits, joint-filing and SSN requirements.
  3. Internal Revenue Service, Schedule 1-A (Form 1040), Part V: 6% phase-out applied to each spouse’s senior deduction (lines 31–37).
  4. Internal Revenue Service, Publication 915, Social Security and Equivalent Railroad Retirement Benefits: provisional income and the $32,000 / $44,000 (joint) and $25,000 / $34,000 (single) thresholds.
  5. Centers for Medicare & Medicaid Services, 2026 Medicare Parts A & B Premiums and Deductibles: IRMAA thresholds and surcharge amounts for Parts B and D.
  6. Social Security Administration, Premiums: Rules for Higher-Income Beneficiaries: two-year look-back, MAGI including tax-exempt interest, and life-changing events.
  7. HealthCare.gov, Federal poverty level (FPL): 2025 and 2026 poverty guidelines and marketplace MAGI definition.
  8. Louise Norris, healthinsurance.org, How sunsetting ARP’s subsidy enhancements is affecting ACA subsidy amounts (Jan. 30, 2026; updated May 27, 2026): expiration of enhanced subsidies and use of 2025 guidelines for 2026 coverage.
  9. Internal Revenue Service, Retirement plan and IRA required minimum distributions FAQs: no lifetime RMDs for Roth IRAs; 10-year rule and its exceptions.
  10. Internal Revenue Service, Publication 590-B, Distributions from IRAs: Uniform Lifetime Table (26.5 at age 73), no recharacterization of conversions after 2017, 10% early-distribution tax, Roth five-year and inheritance rules.
  11. Treasury / IRS, Required Minimum Distributions final regulations, T.D. 10001, 89 FR 58886 (July 19, 2024): applicable age 73 or 75 by birth year; annual distributions for heirs when the owner had begun RMDs.
  12. Internal Revenue Service, Instructions for Form 2210: withholding treated as paid evenly; 90% / 100% / 110% safe harbors.
  13. Internal Revenue Service, Publication 505 (2026), Tax Withholding and Estimated Tax: no premium tax credit above 400% of the poverty line beginning in 2026.