A Roth conversion is a deliberate tax bill. You pull money out of a traditional IRA or 401(k), pay income tax on the amount, and move it into a Roth where it grows tax-free forever. Whether this saves money depends on three numbers: your tax rate now, your tax rate later, and how long the converted money has to grow.
This guide covers when conversions pay off, the 5-year rule that catches early retirees, and the brackets that matter in 2026.
What changed in 2026
- Tax brackets remained at TCJA levels after the December 2025 extension — 22% bracket runs to $103,350 single / $206,700 married.
- The 24% bracket extends to $197,300 single / $394,600 married — the largest "fillable" bracket for high earners doing partial conversions.
- No income limit on conversions — same as 2010, when the limit was removed.
When conversions actually pay off
- Future tax rate higher than today's: convert now, save later.
- Long time horizon for tax-free growth: the longer the runway, the bigger the win.
- Cash on hand to pay the tax bill: paying conversion tax from the IRA itself ruins the math, especially if you're under 59½ (10% penalty on the withholding portion).
- Estate planning: Roth IRAs pass to heirs without forcing distributions during your lifetime, and heirs can stretch over 10 years tax-free.
The 5-year rule (actually two rules)
- Rule 1: Roth contributions — must be in a Roth IRA for 5 years before earnings can be withdrawn tax-free. Clock starts January 1 of the year of your first contribution.
- Rule 2: Each conversion — has its own 5-year clock for penalty-free withdrawal of the converted amount (if under 59½).
This matters for early retirees building a "Roth conversion ladder" — convert a slug each year, wait 5 years, then withdraw that vintage tax- and penalty-free.
1. Bracket-fill conversions — best for late-career and early retirees
Identify your top of the 12% or 22% bracket, then convert just enough to fill it without spilling into the next bracket. Annual exercise. Compounds significantly over a decade.
The trade-off: requires a tax projection each fall. Most people use software (TurboTax's What-If, NewRetirement, Boldin) or a CPA.
2. Conversion ladder for early retirement — best for FIRE pursuers
Retire at 50 with $1.5M in a 401(k). Roll to traditional IRA. Convert ~$50K a year for 10 years, paying low-bracket tax. Each conversion is accessible penalty-free after 5 years, bridging you to 59½ when normal IRA withdrawals open up.
The catch: requires after-tax cash to live on during the first 5 years. ACA subsidies also factor in — large conversions blow up subsidy eligibility.
3. Pre-RMD conversions — best for ages 60 to 73
Required Minimum Distributions start at 73 (75 by 2033 under SECURE 2.0). The window between retirement and RMDs is the prime conversion window — low income, full control over taxable income.
The catch: Medicare IRMAA surcharges kick in based on AGI from two years prior. A big conversion can spike Medicare premiums.
Comparison: conversion strategies in April 2026
| Strategy |
Best age |
Annual conversion |
Goal |
| Bracket fill |
Any |
Variable |
Optimize current-year tax |
| Conversion ladder |
50–60 |
$40K–$70K |
Bridge to 59½ |
| Pre-RMD bulk |
60–72 |
$50K–$200K |
Reduce future RMDs |
| Estate-driven |
Any |
Large |
Pass tax-free to heirs |
| Don't convert |
Future bracket lower |
$0 |
Net negative |
Common mistakes to avoid
Withholding tax from the conversion itself. If you're under 59½, the withheld portion counts as a distribution and gets a 10% penalty. Pay the tax from outside funds.
Ignoring IRMAA and ACA cliffs. A $20,000 conversion can trigger thousands in Medicare premium surcharges or kill an ACA subsidy. Run the full picture, not just the federal tax.
Converting in a high-income year. The whole point is shifting income to low-bracket years. Doing a conversion in your peak earning year usually loses money.
FAQ
Can I undo a conversion?
No. Recharacterization of conversions was eliminated by TCJA. You're committed once you convert.
Does the 5-year rule apply if I'm over 59½?
The conversion-specific 5-year rule (for penalty-free access to converted amounts) goes away after 59½. The contribution 5-year rule (for tax-free earnings) still applies.
Is there a limit per year?
No. You can convert as much as you want in a single year. Tax bill might be enormous.
Where to go next
For related guides see Backdoor Roth IRA in 2026, Best Roth IRA accounts 2026, and The FIRE movement in 2026.