Should I Convert to a Roth IRA? How to Decide Whether, and How Much

Tom and Karen are both 65 and recently retired. They have $2 million in traditional IRAs and are living on savings while they wait to claim Social Security at 70. Neither has ever had a Roth IRA. Their taxable income this year is about $20,000 of interest. A friend tells them this is the perfect time to convert to a Roth. Their tax preparer suggests "filling the 22% bracket."

Both point at something real. But the question isn't whether a Roth conversion is good. It's whether paying tax voluntarily now leaves the family with more after-tax money over their lifetimes, and then the survivor's and heirs', than leaving the money alone. Usually, how much to convert matters more than whether to.

The mechanics, briefly

A conversion moves money from a traditional IRA to a Roth IRA. The pre-tax amount converted is taxed as ordinary income that year. After that, growth can come out tax-free, and the original owner never has to take required minimum distributions (RMDs). Conversions made since 2018 can't be undone.

If you've ever made nondeductible IRA contributions, the pro-rata rule applies. You can't convert only the after-tax dollars. Form 8606 treats all your traditional, SEP and SIMPLE IRAs as one pool at year end, and each conversion is taxable in proportion.

The real test: today's rate versus the rate those dollars would face later

Every conversion dollar is taxed once either way. You pay now, at today's effective marginal rate, or later, at whatever rate applies when you, a surviving spouse or your heirs withdraw it. With equal growth, if the rate now is lower, converting wins. "Effective" matters, because the bracket is only part of the cost of the next dollar.

Tom and Karen's numbers

This uses 2026 federal figures and excludes state tax. Illinois, where they live, doesn't tax IRA conversions included in federal income. They file jointly and take the standard deduction. That's $32,200, plus $1,650 each for being 65 or older, plus the new $6,000-per-person senior deduction, which runs through 2028.

The moderate conversion is taxed through the 10%, 12% and 22% brackets: $11,600 on the first $100,800 of taxable income, plus 22% of the remaining $74,500. The larger one reaches the 24% bracket: $35,932 on the first $211,400, plus 24% of $163,100.

The averages hide the cost of the last dollars:

• The senior deduction phases out. Each spouse's $6,000 shrinks by 6% of income above $150,000. For this couple, that's 12 cents of lost deduction per extra dollar. From about $130,000 to $195,000 of conversion, each dollar costs about 24.6%, not 22%.
• Medicare surcharges. Medicare's income-related premiums (IRMAA) are based on income from two years earlier, so a 2026 conversion affects 2028 premiums. Those rates haven't been set, so this uses 2026 premiums and thresholds as hypothetical stand-ins. On those figures, the moderate conversion stays just under the $218,000 joint threshold where the first tier begins. The larger one lands in the third tier, which would add about $9,240 to the couple's Part B and Part D premiums for the year.

So the second $195,000 costs $47,086 in tax plus about $9,240 in illustrative premiums. That's roughly 29% on that block.

What the dollars would face later

Now the other side. Assume a 3% return after inflation, with today's tax tables standing in for inflation-adjusted future ones. With no conversions, their IRAs would be about $2.7 million at 75, when their RMDs begin. Assume $90,000 a year of combined Social Security at 70. Their first RMD of about $109,000, plus Social Security and interest, would mean about $170,000 of taxable income: the 22% bracket, near the first Medicare surcharge.

After the first death, the survivor files as single, with brackets about half as wide, but keeps the larger Social Security check and the whole IRA. Even after five years of withdrawals, with the rest still growing 3%, the IRA's RMD at 80 would be about $123,000. For a survivor, that would put them in the 24% single bracket and in a Medicare surcharge tier. Children inheriting the account would generally have 10 years to empty it, often during their own peak-earning years.

This is a simplified illustration, not a complete lifetime projection for the household. It assumes the converted dollars, and the cash used to pay the conversion tax, would both grow 3% a year after inflation for 15 years. The illustrative Medicare surcharge wouldn't be paid until 2028, so it's compounded for 13 years. It assumes the tax is paid from a taxable account, not from the IRA, and that the dollars left in the IRA are eventually taxed at a single future rate. It ignores tax on the taxable account's growth, future Medicare surcharges and state tax. On those assumptions:

• The moderate conversion (about 14% now) comes out ahead at a future rate of 22%. It leaves the family roughly $23,000 better off in today's dollars, and more if the survivor or heirs end up paying 24% or more.
• The second $195,000 (about 29% now) only pays off if those dollars would otherwise be taxed at about 29% or more, for example by heirs in high brackets. At 22% it loses about $20,100. At 24% it loses about $14,000.

The figures depend on the assumptions, but the pattern is common: the first dollars are the easy decision, and the later ones are a bet on higher future rates.

Paying the tax from savings, not from the IRA, helps the comparison. When rates now and later are equal, a conversion paid out of the IRA itself only breaks even. Paying from a taxable account effectively moves more money into the tax-free account, but it also spends cash you might need, so the cash-flow plan has to support it.

When converting is a poor decision

• Your future rate is likely lower. Examples are a single person expecting modest income in retirement, or heirs in low brackets.
• You plan to give. From age 70½, qualified charitable distributions (QCDs) can go directly from an IRA to charity tax-free, up to $111,000 per person in 2026. Paying tax to convert dollars you'll eventually give away wastes the tax.
• The tax would have to come out of the IRA, or you'll need the money within a few years.
• The conversion pushes other costs over a threshold. Once Social Security begins, conversion income can make up to 85% of benefits taxable. In a low-income year, it can also crowd out the 0% capital gains rate, which applies up to $98,900 of taxable income on a joint return. That's one reason the years before claiming Social Security are often the best window.

For more on how withdrawals, capital gains and Social Security fit together across retirement, see how to maximize tax efficiency in retirement.

Market downturns and the five-year rules

Converting after a market drop moves more shares for the same tax bill. That helps only if the recovery happens inside the Roth and you'd have converted anyway. A drop doesn't change the rate comparison, markets can keep falling, and there's no undo.

Roth IRAs also have two separate five-year clocks:

• For tax-free earnings. Earnings come out tax-free once you're 59½ and five years have passed since January 1 of the year of your first Roth IRA contribution or conversion. Because Tom and Karen have no Roth IRA, a 2026 conversion would start that clock, and their earnings would be tax-free from 2031. Before then, withdrawals come out of converted dollars first, which aren't taxed again.
• For the 10% penalty. Each conversion has its own five-year clock for the 10% additional tax on converted amounts withdrawn before 59½. At 65, it doesn't apply to them.

The decision, year by year

A good analysis asks what the next $10,000 costs today, including lost deductions and Medicare premiums, and what those dollars would likely cost you, a survivor or your heirs later. Then it repeats every year. For many households the answer is "some": enough to shrink future RMDs and protect a survivor, without overpaying today for an uncertain benefit.

If you'd like to look at what that comparison shows for your own accounts, you can reach me here.

This article is for general education only and isn't individualized tax or investment advice. The example is hypothetical, uses 2026 federal tax figures and simplified assumptions, and doesn't represent any actual client. Talk with a tax professional before converting.