Roth conversions and filling a tax bracket

A Roth conversion moves money from a traditional, pre-tax account such as a traditional IRA into a Roth IRA. You pay income tax on the amount converted in the year you convert. After that, the money grows tax-free, and qualified withdrawals are tax-free too.

Why pay tax early on purpose? Because the rate you pay depends on the year. Many retirees have a few low-income years between retiring and starting Social Security or required distributions. Converting then can mean paying tax at a lower rate than they'd pay later.

How "filling a bracket" works

Federal income tax is charged in brackets. Each slice of taxable income is taxed at its own rate. For 2026, the brackets for a married couple filing jointly start like this:

"Filling a bracket" means converting just enough to bring your taxable income to the top of a chosen bracket. Every converted dollar is then taxed at that bracket's rate or lower, and none spills into the next one.

To find the amount, add your deductions to the top of the bracket, then subtract the income you already have.

A worked example

Elena and David are both 66 and file jointly. They retired last year. They plan to claim Social Security at 70. This year their only income is a $30,000 pension and $6,000 of interest. They have $1,400,000 in traditional IRAs and a small Roth IRA.

Their 2026 deductions:

Their $36,000 of income is below their deductions, so their taxable income is zero. Right now, their low brackets are going unused.

To fill the 12% bracket, they want taxable income of $100,800:

• Top of the 12% bracket plus deductions: $100,800 + $47,500 = $148,300 of income.
• Minus the income they already have: $148,300 − $36,000 = $112,300 to convert.

Federal tax on that conversion is about $11,600: 10% on the first $24,800 of taxable income and 12% on the rest. That's an average of about 10.3% on the amount converted. State tax may apply on top.

Why it might be worth it

Look ahead nine years. They were born in 1960, so required minimum distributions start at 75. Suppose their IRAs have grown to $2,000,000 by then. The first required distribution would be about $81,300, using the IRS divisor of 24.6 at that age.

Add $60,000 of Social Security, most of it taxable, and the pension. Their taxable income would be roughly $126,800 in today's dollars, which is in the 22% bracket. The senior deduction will have ended by then.

Converting now at about 10% to 12% instead of later at 22% is the core of the trade. It also shrinks future required distributions, and it leaves heirs Roth money instead of taxable IRA money.

Why it might not be

Conversions aren't automatically right. They cost tax now, with certainty, for a benefit that depends on the future: tax law, returns, how long you live and who inherits. If you expect your tax rate to be lower later, or you'll need the money soon, converting may not help.

What else a conversion can trigger

A conversion adds to your income. That can affect more than your bracket:

• Medicare premiums (IRMAA). Medicare Part B and D premiums rise in tiers when income passes set thresholds. Income from two years earlier is used. For 2026 premiums, the first surcharge applies to joint income over $218,000. A conversion at 63 or later can raise premiums two years on. See IRMAA and ACA cliffs.
• ACA premium subsidies. If you buy health insurance on the marketplace before 65, more income means a smaller subsidy. In 2026, the subsidy ends entirely above 400% of the poverty line.
• The senior deduction. For a joint return, it shrinks by 6% of income above $150,000. Elena and David's plan stops just below that.
• Taxation of Social Security. If you're already receiving benefits, extra income can make more of them taxable. That raises the effective rate on the conversion.
• Capital gains. Conversions are ordinary income, and they stack below capital gains. A conversion can push gains out of the 0% rate into the 15% rate.

Practical points

• Pay the tax from other savings if you can. Paying it from the converted amount leaves less in the Roth. Before 59½, money withheld from the conversion can also count as an early withdrawal.
• Each conversion has its own five-year clock. Converted amounts withdrawn within five years, before 59½, can face the early-withdrawal penalty. After 59½ this doesn't apply.
• Conversions can't be undone. You can't reverse a conversion later, so size it with care. Many people convert late in the year, once their income is clearer.
• Plan for the survivor. When one spouse dies, the other usually files as single in later years, with narrower brackets. Converting while both are alive can reduce that later tax.

How the app tests conversions

You can set conversions in your plan as a fixed amount each year or to fill a chosen bracket, with start and end years. Options can stop each conversion before it crosses the next Medicare surcharge tier or the ACA subsidy cliff.

The Roth conversion explorer on the Taxes screen tries about 125 combinations of target bracket and timing on your projection. It ranks them by lifetime taxes or by what's left after tax. You can apply the one you prefer to your plan or try it as a scenario first.

Frequently asked questions

Is there a limit on how much I can convert?

No. Income limits apply to contributing to a Roth IRA, not to converting. The limit that matters is how much tax you're willing to pay in one year.

Do I have to be retired to convert?

No. But your bracket is usually higher while you're working, so the low-income years after retiring are often a better window.

Do required distributions count?

A required minimum distribution can't itself be converted. Once required distributions start, you must take the required amount first, then convert more if you want.