Paying extra tax on purpose sounds backward, especially after retirement, when every dollar feels more precious. Yet leaving a large traditional IRA untouched can create years of forced taxable withdrawals, higher Medicare costs, and less control after one spouse dies.
Jack’s hypothetical case shows why a large Roth conversion in 2026 can be rational even when it produces an uncomfortable tax bill.
The answer is not “convert everything,” but calculate the price today against the taxes and constraints the household may face later.
The tax bill is the price, not the objective
Jack is a hypothetical 63-year-old who recently left full-time work. His spouse is 62, neither spouse has claimed Social Security, and most of their retirement savings remain in traditional tax-deferred accounts.
That creates an opportunity that may not last. Their taxable income is temporarily lower than it was during Jack’s career and could rise again when Social Security, pensions, and required minimum distributions overlap.
A Roth conversion moves money from a traditional account into a Roth account. The previously untaxed amount generally becomes ordinary income in the conversion year, but qualified Roth withdrawals can later be federal-income-tax-free, and Roth IRAs have no lifetime RMDs for the original owner.
The relevant 2026 figures provide the boundaries for Jack’s calculation. They are starting points, not automatic conversion targets.
| Retirement item | 2026 figure | Why it matters |
|---|---|---|
| Married filing jointly standard deduction | $32,200 | Shelters part of ordinary income |
| 12% bracket ends, married filing jointly | $100,800 taxable income | Identifies lower-rate conversion room |
| 22% bracket ends, married filing jointly | $211,400 taxable income | Shows how much room remains before 24% |
| Enhanced senior deduction | Up to $6,000 per eligible person | Ages 65 and older may qualify; phaseout begins above $150,000 joint MAGI |
| Standard Medicare Part B premium | $202.90 monthly | Higher-income enrollees can pay IRMAA |
The federal bracket figures and basic standard deduction come from the IRS’s 2026 inflation adjustments. The enhanced senior deduction applies from 2025 through 2028, with eligibility and income limits described in IRS Publication 6142.
A bracket ceiling is based on taxable income, not the conversion amount or adjusted gross income by itself. Credits, deductions, capital gains, Social Security, IRA basis, and state taxes can all make a household’s actual calculation materially different.
Jack’s case for a big Roth conversion in 2026
Assume Jack and his spouse expect $50,000 of ordinary income in 2026 from a pension, interest, and the spouse’s wages. They have no Social Security income or realized capital gains, take the $32,200 standard deduction, and are not using Marketplace health-insurance subsidies.
Jack considers converting $140,000 from a fully pretax traditional IRA. The following simplified federal calculation excludes state tax, credits, additional deductions, alternative minimum tax, and other return-specific items.
| Simplified 2026 calculation | No conversion | $140,000 conversion | Difference |
|---|---|---|---|
| Adjusted gross income | $50,000 | $190,000 | $140,000 |
| Standard deduction | $32,200 | $32,200 | $0 |
| Taxable income | $17,800 | $157,800 | $140,000 |
| Estimated regular federal income tax | $1,780 | $24,140 | $22,360 |
| Average federal tax on converted dollars | — | About 16.0% | — |
The conversion’s last dollars reach the 22% bracket, but Jack does not pay 22% on the entire $140,000. Some converted dollars use the household’s remaining standard deduction and the unused portions of the 10% and 12% brackets.
That distinction is the early payoff in Jack’s analysis: a $22,360 additional federal tax bill looks large, but it represents an average federal conversion cost of about 16% under these assumptions. It does not prove the conversion is worthwhile, but it is far more informative than saying Jack “converted in the 22% bracket.”
Jack would still need to model state tax and any changes in deductions or credits. If his actual income differs from the projection, the final conversion rate could be higher or lower.
Why the years before Social Security and RMDs matter
Jack’s low-income window exists because several future income streams have not started. Once Social Security and required distributions arrive, he may be unable to turn either stream off simply to create tax-bracket room.
Under current law, Jack was born after 1959, so his applicable RMD age is 75. People born from 1951 through 1959 generally have an RMD age of 73, while those born in 1960 or later generally reach the applicable age at 75 under SECURE 2.0 rules described in IRS guidance.
That does not mean Jack should spend 12 years converting at any cost. It means he has a finite period in which partial conversions may reduce a traditional balance before withdrawals become mandatory.
The IRS generally calculates an RMD by dividing the previous December 31 account balance by a life-expectancy factor. The Uniform Lifetime Table uses a factor of 24.6 at age 75, except when a different table applies.
If Jack entered age 75 with exactly $1 million in the relevant traditional IRA and the 24.6 factor applied, his first-year RMD would be approximately $40,650. That is a static illustration, not a projection; his actual balance, applicable table, tax law, and withdrawals could all differ.
RMDs may be larger than the household needs for spending. They can increase taxable income while Social Security, pension payments, dividends, and realized gains are already filling the return.
Roth IRA money gives Jack another source from which qualified withdrawals ordinarily do not increase federal adjusted gross income. That flexibility can matter when the household wants to replace a roof, help a child, buy a car, or fund a large trip without stacking an additional taxable IRA withdrawal onto the same year.
The survivor’s tax return changes the calculation
Jack is not planning only for two healthy spouses filing jointly. If one spouse dies, the survivor will generally move from joint filing status to single status after any qualifying surviving-spouse period, yet may still control much of the same retirement-account balance.
For 2026, the 22% bracket begins above $50,400 of taxable income for single filers but above $100,800 for married couples filing jointly. The thresholds are not a perfect two-to-one relationship at every level, but a survivor can encounter a higher marginal rate with less household income.
The surviving spouse may also lose one Social Security benefit, depending on the couple’s benefit amounts and claiming history. Expenses rarely fall by the same proportion because property taxes, home maintenance, utilities, and many insurance costs continue.
A conversion can therefore serve a relationship goal as well as a tax goal. Jack is effectively prepaying some tax while the household has joint brackets so the survivor may have a more flexible balance of traditional, taxable, and Roth assets.
This is not automatically favorable. If the surviving spouse would have lower spending, large deductions, or little traditional money remaining, paying tax now could still be the more expensive choice.
Medicare can turn a good conversion into an expensive one
Medicare’s income-related monthly adjustment amount, or IRMAA, applies to Part B and Part D when modified adjusted gross income exceeds annual thresholds. Medicare generally uses tax information from two years earlier, so a 2026 conversion may affect 2028 premiums.
The 2028 premiums and thresholds are not yet known. The following table shows the official 2026 amounts, which are generally based on 2024 tax-return income and should not be reused as a forecast for 2028.
| Individual MAGI | Joint MAGI | 2026 Part B monthly premium | 2026 Part D monthly IRMAA* |
|---|---|---|---|
| $109,000 or less | $218,000 or less | $202.90 | $0 |
| $109,001–$137,000 | $218,001–$274,000 | $284.10 | $14.50 |
| $137,001–$171,000 | $274,001–$342,000 | $405.80 | $37.50 |
| $171,001–$205,000 | $342,001–$410,000 | $527.50 | $60.40 |
| $205,001–$499,999 | $410,001–$749,999 | $649.20 | $83.30 |
| $500,000 or more | $750,000 or more | $689.90 | $91.00 |
*Part D IRMAA is paid in addition to the person’s plan premium. These figures come from the CMS 2026 Medicare premium fact sheet.
Jack’s hypothetical 2026 MAGI of $190,000 is below the 2026 joint IRMAA threshold, but that observation cannot settle his 2028 result. The applicable 2028 threshold, premium, marital status, and Medicare enrollment circumstances will control.
IRMAA is also assessed per Medicare enrollee, not per tax return. A couple with both spouses enrolled can therefore experience two Part B increases and two Part D adjustments.
Because Jack turns 65 in 2028, his 2026 return may become relevant just as he enters Medicare. His spouse would still be 64, so the household must also consider how the conversion affects the spouse’s pre-Medicare coverage.
Health coverage may be a bigger constraint before 65
A retiree receiving advance premium tax credits through the Health Insurance Marketplace cannot evaluate a conversion using tax brackets alone. Conversion income raises adjusted gross income and can reduce or eliminate the credit.
For 2026, the temporary expansion that allowed premium tax credits above 400% of the federal poverty level no longer applies under current IRS guidance. A household above the applicable limit may have to repay advance credits, as explained in the IRS Premium Tax Credit questions and answers.
That is why Jack’s example expressly assumes the couple is not receiving a Marketplace subsidy. If they were, the lost credit could cost more than the apparent benefit of using a lower federal bracket.
Employer retiree coverage, COBRA, a spouse’s workplace plan, and Marketplace insurance each create different constraints. The insurance arrangement should be identified before the conversion amount is selected, not discovered when the tax return is prepared.
Social Security and the temporary senior deduction create other traps
A Roth conversion does not reduce Jack’s Social Security benefit, but it can cause more of an existing benefit to become taxable.
SSA explains that up to 50% of benefits may enter the federal calculation above combined-income thresholds of $25,000 for single filers and $32,000 for joint filers; up to 85% can be taxable above $34,000 and $44,000, respectively.
Those thresholds are not ordinary tax brackets, and crossing them does not mean 85% of the benefit is taxed at an 85% rate. It means as much as 85% of the benefit may be included in taxable income, according to the Social Security Administration.
For taxpayers age 65 and older, a conversion can also shrink the temporary enhanced senior deduction. From 2025 through 2028, the deduction is as much as $6,000 for each eligible person, and its phaseout begins above modified adjusted gross income of $75,000 for single filers or $150,000 for joint filers.
That deduction is separate from the regular age-based additional standard deduction. A conversion projection for an older household should calculate the actual deduction rather than automatically subtracting the maximum.
Why Jack does not convert the entire IRA
A strong case for converting $140,000 is not a case for converting $1 million. Additional dollars could enter the 24%, 32%, or higher brackets, trigger other tax interactions, and consume cash the household needs for emergencies.
Jack also values tax diversification. Traditional money can still be useful when future deductions create low-tax withdrawal opportunities, while taxable assets may receive different capital-gain treatment and a basis adjustment at death under current law.
Converting everything would exchange one concentration for another. A household with only Roth money may have prepaid more tax than necessary, particularly if future taxable income turns out lower than expected.
Jack’s aim is therefore to buy an amount of future flexibility at an acceptable price. He is not trying to eliminate every future tax or predict Congress with false confidence.
Jack’s Roth-conversion readiness check
The strongest candidates generally have a temporary low-income year, enough outside cash to pay the tax, and a long period before the converted money is needed.
Warning signs include near-term spending needs, subsidized health coverage, uncertain income, and an inability to tolerate the conversion’s irreversibility.
This readiness table turns those principles into household questions. A single warning sign does not automatically prohibit a conversion, but it deserves a quantified answer.
| Area | Stronger position | Warning sign |
|---|---|---|
| Current versus future tax | Current effective conversion rate appears lower | Future taxable income is likely to fall substantially |
| Tax-payment source | Tax can be paid from planned outside cash | Tax requires draining the IRA or emergency reserve |
| Time horizon | Roth assets may remain invested for years | Converted money will soon fund living expenses |
| Health coverage | No material subsidy or IRMAA damage | Conversion causes a large subsidy loss or surcharge |
| Cash-flow plan | Spending and large purchases are funded | Conversion leaves little liquid cash |
| Tax data | Income, gains, basis, and deductions are known | Year-end income remains highly uncertain |
| Household planning | Survivor and legacy effects were modeled | Decision considers only today’s joint return |
Jack passes the test only under the hypothetical assumptions. A different Jack with high medical deductions, a charitable plan, large after-tax IRA basis, or an imminent move to a lower-tax state could reach another result.
The tax-payment source is especially important. Vanguard’s Roth-conversion research finds that paying the conversion tax from assets outside the IRA can improve the economics because the full converted amount remains in the tax-advantaged account; its broader framework compares the future rate with a calculated break-even rate rather than relying on a slogan.
The five-year rules are not one simple lock
Roth five-year rules are frequently compressed into the claim that converted money is always inaccessible for five years. The actual rules distinguish qualified treatment of Roth earnings from the separate recapture rule that can apply to converted amounts withdrawn early.
A qualified Roth IRA distribution generally requires both an eligible event, such as reaching age 59½, and satisfaction of the five-tax-year period beginning with the first year for which the owner contributed to a Roth IRA.
Each conversion also has a separate five-year period for purposes of the early-distribution recapture rule described in IRS Publication 590-B.
Because Jack is already over age 59½, the early-distribution penalty concern is different from that of a 45-year-old converter. Nevertheless, he must still determine whether the Roth IRA’s qualified-distribution five-year period has been met before assuming all earnings can be withdrawn tax-free.
The simplest practical response is not to memorize a slogan. Jack should establish when his first Roth IRA contribution was made, retain conversion records, and avoid using the new Roth as an immediate spending account.
IRA basis and RMDs require extra care
If Jack has ever made nondeductible traditional IRA contributions, not every converted dollar is necessarily taxable. However, he generally cannot select only the after-tax dollars and declare the conversion tax-free while leaving all pretax IRA money behind.
Form 8606 calculations consider traditional, SEP, and SIMPLE IRA balances when determining the taxable and nontaxable portions. Missing old basis records can therefore create an incorrect tax estimate or cause the same money to be taxed twice.
Jack must also take any required distribution before converting if he performs a conversion during an RMD year. The RMD itself is not eligible for conversion, as the IRS explains in Publication 590-A.
Roth IRAs and designated Roth workplace accounts do not currently require lifetime RMDs for the owner. That rule reduces forced distributions, but beneficiaries can still face post-death distribution requirements.
How Jack would execute the conversion without guessing
The conversion decision should begin with a draft tax return, not an account-transfer form. Jack can then update the projection when wages, interest, capital gains, charitable gifts, and year-end fund distributions become clearer.
Because post-2017 conversions generally cannot be recharacterized back to traditional IRAs, leaving a margin for uncertainty is sensible. The IRS confirms that conversion reversals are no longer available in its Form 8606 instructions.
| Priority | What Jack reviews | Practical next step |
|---|---|---|
| 1. Baseline return | Income, gains, deductions, credits, IRA basis | Prepare a 2026 projection without conversion |
| 2. Conversion range | Incremental federal and state tax | Test several amounts instead of one round number |
| 3. Benefit interactions | ACA credits, IRMAA, Social Security taxation | Calculate total household cost |
| 4. Cash source | Tax cash and emergency reserves | Avoid withholding from the converted principal when practical |
| 5. Execution | Custodian processing dates and account details | Request a direct trustee-to-trustee conversion early |
| 6. Tax payment | Withholding, estimates, and safe-harbor position | Arrange timely payment and retain records |
| 7. Follow-up | Portfolio allocation and beneficiaries | Confirm the Roth is invested and designations are current |
The transaction must be completed within the calendar year to count as that year’s conversion. Custodians can impose earlier processing deadlines, so waiting until the final trading day creates avoidable operational risk.
A large conversion can also create an underpayment penalty if Jack does not arrange sufficient withholding or estimated payments. IRS Publication 505 for 2026 explains that estimated payments may be required when withholding and credits will not cover enough of the year’s tax.
What changes after the conversion
The immediate change is unpleasant but visible: cash leaves the household to pay tax. The more meaningful change is that Jack now controls a larger pool that may support qualified tax-free withdrawals without adding to adjusted gross income.
That can make ordinary retirement decisions easier to coordinate. Jack might fund a large purchase from Roth money in a year when an additional traditional withdrawal would push income across a Medicare threshold or cause more investment gains to be taxed at a higher rate.
The conversion can also change how the couple experiences market volatility. If markets fall after an irreversible conversion, Jack may feel that he paid tax on value that subsequently disappeared, even though the long-term decision should be judged across the full planning horizon.
That behavioral risk matters. A technically defensible conversion can still be too aggressive if the resulting tax payment or short-term loss would cause the household to abandon its investment plan.
Tax diversification does not guarantee lower lifetime taxes. It gives the household more choices about which account to use, which can be valuable even when future tax rates cannot be predicted accurately.
When paying more tax is a bad bargain
Jack’s argument fails if his current conversion rate is clearly higher than the rate likely to apply to future traditional withdrawals.
It also weakens when the household expects major future deductions, plans to give IRA money to charity through qualified charitable distributions, or will soon relocate to a state with lower taxation of retirement income.
A conversion may be especially unattractive when the tax must come from the IRA itself. Withholding part of the distribution leaves less money in the Roth, and people under 59½ may face an additional early-distribution tax on amounts not successfully converted unless an exception applies.
Poor health and a short investment horizon can also reduce the benefit, although estate goals may point in another direction. Longevity should never be treated as a prediction about an individual person.
Large traditional balances do not automatically require one large conversion. Annual partial conversions can preserve bracket control, adapt to changing markets and laws, and reduce the risk of overshooting an income-related threshold.
