How to Plan a Roth Conversion: A Step-by-Step Guide

A Roth conversion is one of the rare tax decisions where you get to choose the timing. You move money from a traditional IRA (or an old 401(k)) into a Roth IRA, pay ordinary income tax on the amount you move this year, and in exchange that money can grow and eventually come out tax-free.

I like to explain it with a farming analogy. With a traditional IRA, you pay tax on the harvest. With a Roth, you pay tax on the seed. If you can pay tax on the seed at a low rate, and the harvest is years away, that trade can be a very good one. If the seed is expensive to tax, it may not be.

The concept is simple. The execution is where families either save real money or accidentally overpay. Here is the process I walk through, one step at a time.

What a Roth Conversion Actually Does

Before running any numbers, it helps to know exactly what changes when dollars move from one account to the other.

• Every dollar you withdraw from a traditional IRA is taxed as ordinary income, and required minimum distributions (RMDs) begin at age 73, or 75 if you were born in 1960 or later.

• Qualified Roth IRA withdrawals are tax-free, and the original owner never has to take RMDs.

• There is no income limit on conversions and no annual cap on how much you can convert.

• The converted amount is added to your taxable income for the year of the conversion.

• Since 2018, a conversion cannot be undone. Once it is done, the tax bill is yours.

That last point is why the steps below matter. You only get one shot at each year's decision.

Step 1: Decide Whether a Roth Conversion Fits Your Situation

The core question is always the same: is your tax rate today lower than the rate you (or your heirs) are likely to pay on this money later?

Situations where the answer is often yes:

• Gap years. The window between retirement and the start of Social Security and RMDs is frequently the lowest-income stretch of a person's adult life.

• An unusually low-income year. A business with a slow year, a sabbatical, or time between jobs can open up room in a low bracket.

• Large traditional balances. Big IRAs can produce RMDs large enough to push you into a higher bracket in your 70s and 80s.

• A future single filer. When one spouse passes away, the survivor usually files as single on a similar income, which can mean higher brackets on the same dollars.

• Heirs in high brackets. Most non-spouse beneficiaries must empty an inherited IRA within 10 years, often during their own peak earning years.

Situations where it may not fit: you will need the money within the next few years, you would have to pay the tax out of the IRA itself, or you fully expect to be in a lower bracket later.

Step 2: Map Your Tax Brackets Before You Convert

Think of each tax bracket as a glass with a fill line. A Roth conversion pours income into the glass. The goal is to fill up to a line you choose, not to spill over into the next, more expensive glass.

Here are the 2026 federal brackets, based on taxable income:

2026 tax rate	Married filing jointly	Single
10%	$0 to $24,800	$0 to $12,400
12%	$24,801 to $100,800	$12,401 to $50,400
22%	$100,801 to $211,400	$50,401 to $105,700
24%	$211,401 to $403,550	$105,701 to $201,775
32%	$403,551 to $512,450	$201,776 to $256,225
35%	$512,451 to $768,700	$256,226 to $640,600
37%	Over $768,700	Over $640,600

Taxable income is what's left after deductions. In 2026, the standard deduction is $32,200 for married couples and $16,100 for single filers, with a little more for those 65 and older. Through 2028, people 65 and older can also take an extra senior deduction of up to $6,000 each. That deduction phases out at higher incomes, and conversion income counts toward the phase-out, which quietly raises the true cost of converting in that range.

Here is a simplified example. A married couple, both 66, are retired and delaying Social Security. After deductions, their taxable income is about $60,000. That leaves roughly $40,800 of room before they leave the 12% bracket, and converting that amount would add about $4,896 in federal tax.

Filling the 22% bracket as well would mean converting roughly another $110,000. That might still make sense for some families, but as the next step shows, the bracket is not the only line on the glass.

Step 3: Check the Hidden Thresholds

Your tax bracket isn't the only thing that changes when your income goes up. Several other costs and benefits are tied to your income too, and conversion income counts toward every one of them. Think of it like driving a tall truck: staying under the speed limit isn't enough, you also have to watch for low bridges. Here are four to check before you convert.

Medicare IRMAA. Medicare Part B and Part D premiums rise once income crosses certain thresholds. For 2026, the first threshold is $109,000 of modified adjusted gross income for single filers and $218,000 for joint filers. The standard Part B premium is $202.90 per month, and the first surcharge tier raises it to $284.10 per person. Two details catch people off guard:

• IRMAA uses your income from two years earlier, so a conversion in 2026 affects your 2028 premiums. That means this matters starting around age 63.

• It works like a cliff. Going one dollar over a threshold triggers the full surcharge for that tier.

Social Security taxation. Once you are collecting benefits, extra income from a conversion can cause more of your benefit to become taxable, up to 85%.

Health insurance premium credits. If you are under 65 and buy coverage through the marketplace, higher income can reduce the premium tax credit you receive.

State income tax. Every state has its own rules and deductions for retirement income, so where you live, and where you plan to live, belongs in the math. Georgia, for example, taxes IRA distributions and conversions but offers a retirement income exclusion of up to $35,000 per person ages 62 to 64 and up to $65,000 per person age 65 and older.

Step 4: Plan How You Will Pay the Tax

Whenever possible, pay the conversion tax with money from outside the IRA, such as a savings or taxable brokerage account.

Paying the tax out of the converted funds is a bit like paying for a home renovation by selling off one of the rooms. You shrink the very thing you were trying to improve. And if you are under 59½, the portion withheld for taxes can be treated as an early distribution and hit with a 10% penalty.

Also plan for timing. A large conversion can create a surprise balance due in April, along with underpayment penalties, if you don't increase withholding or make an estimated payment in the same year.

Step 5: Understand the Five-Year Rules and the Pro-Rata Rule

There are two separate five-year clocks, and they are easy to mix up.

• The Roth account clock. To withdraw earnings tax-free, your first Roth IRA must have been open for at least 5 years (the clock starts January 1 of the year of your first contribution or conversion) and you must be at least 59½.

• The conversion clock. Each conversion has its own five-year clock for the 10% penalty. This only matters if you are under 59½ when you withdraw the converted dollars.

Then there is the pro-rata rule. If you have ever made nondeductible (after-tax) contributions to an IRA, you cannot choose to convert only the after-tax dollars. The IRS looks at all of your traditional, SEP, and SIMPLE IRA balances together as of December 31. It works like cream stirred into coffee. Once it is mixed in, you can't pour out just the cream. Every conversion carries a proportional share of taxable and nontaxable dollars.

Step 6: Spread the Roth Conversion Over Several Years

For most families, the best results come from a series of partial conversions rather than one big one. Converting a measured amount each year keeps you filling the lower glasses instead of overflowing into the expensive ones.

A few practical habits help:

• Convert late in the year. The deadline is December 31, not the April tax deadline. Waiting until you know your full-year income makes it easier to hit your target.

• Use market declines. Converting after a drop lets you move more shares for the same tax bill, and the recovery happens inside the Roth.

• Leave room for giving. Starting at age 70½, qualified charitable distributions can only come from a traditional IRA. If charitable giving is part of your plans, it can make sense to leave some money unconverted.

• Revisit every year. Tax law, income, health, and family circumstances change. A conversion plan should be updated annually, not set once and forgotten.

In our own planning work, this is a year-by-year exercise that sits alongside Social Security timing, Medicare, and withdrawal planning, because each one changes the numbers for the others.

Bottom Line

A Roth conversion lets you decide when to pay tax on retirement savings, and the best years to do it are often the quiet ones: early retirement, a slow business year, or the stretch before RMDs begin. The real work is knowing where your brackets end, which hidden thresholds sit nearby, and how to pay the bill without shrinking the account you're converting. This article is for education only; your tax professional should review the specifics of your situation before any conversion.

Alpha Financial Management is a fee-only fiduciary planning and investment firm serving individuals and families from our offices in Savannah, Bluffton, and Alpharetta. We help clients bring their retirement, tax, investment, and estate decisions together into one coordinated plan, always with their best interests first.