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Is moving money into a Roth worth the tax bill today?
$11,
This week: check last year's taxable income before you pick a conversion amount.
| Conversion amount | Taxes paid | Tax rate | Future Roth value | Net benefit |
|---|---|---|---|---|
| $10,000 | $2,200 | 22.0% | $106,766 | -$10,677 |
| $25,000 | $5,500 | 22.0% | $266,915 | -$26,691 |
| $50,000 | $11,164 | 22.3% | $533,829 | -$55,134 |
| $75,000 | $17,164 | 22.9% | $800,744 | -$87,164 |
Written by Elizabeth Stein
Married filing jointly, $90,000 of income is $57,800 of taxable income after the $32,200 standard deduction, all in the 12% bracket for 2026. Converting $50,000 adds $6,700 of federal tax, an effective rate of 13.4% on the converted amount, because $7,000 of it lands in the 22% bracket and the rest stays at 12%. If that $50,000 then grows at 7% for 20 years, it reaches about $193,484 completely tax-free. Whether that beats leaving it in the Traditional IRA depends entirely on what tax rate you'd pay pulling it out at retirement instead.
Finance Quest is educational. It is not financial advice, and no calculator here knows your full situation.
A conversion is taxed as ordinary income the year it happens, and a single large conversion can push the top slice of it into a much higher bracket than your everyday income sits in. Converting $50,000 at a stretch in the example above meant about $7,000 of it got taxed at 22% instead of 12%. Spreading the same total conversion across several years, filling only up to the top of your current bracket each year, usually costs less in total tax than doing it all at once.
No. Roth recharacterization was eliminated for conversions starting in 2018. Once you convert, the tax bill is final for that tax year, which is exactly why sizing the conversion carefully matters more than most other retirement decisions.
When your current tax rate is lower than you expect it to be later; common windows are early retirement before Social Security and required distributions start, or a year with unusually low income. It also helps if you have cash outside the IRA to pay the conversion tax, since that keeps the full converted amount growing tax-free.
It can. A conversion adds to your reported income for that year, and Medicare uses income from two years prior to set IRMAA surcharges on Part B and Part D premiums. A conversion timed close to age 63 is the one most likely to trigger this, since it lands in the lookback window.
Rarely. Converting everything in one year usually pushes a large chunk of it into your highest marginal bracket. Multi-year conversions that fill up to the top of a target bracket each year, sometimes over five or ten years, generally cost less in total tax for the same amount converted.