Roth conversions, how they work and when they make sense

What is a Roth conversion?

A Roth conversion takes money sitting in a pre-tax retirement account, most commonly a traditional IRA or a traditional 401(k), and moves it into a Roth IRA. Unlike a normal Roth IRA contribution, which is capped at a few thousand dollars a year and phases out at higher incomes (see our Roth IRA explainer), a conversion has no income limit and no dollar cap. You can convert $2,000 or $2 million in a single year if the account holds it. The trade is that a normal contribution uses money you already paid tax on, while a conversion uses money that has never been taxed, so the IRS collects that tax at the moment of conversion.

Why do people convert to a Roth?

Three reasons come up most often. First, tax-free growth: once the money is in the Roth IRA, it never owes tax again on its gains, dividends, or qualified withdrawals. Second, no RMDs: a traditional IRA forces withdrawals starting at age 73, whether you need the money or not, while a Roth IRA has no lifetime withdrawal requirement for the original owner (see our RMD explainer). Converting removes that account from the RMD calculation entirely. Third, estate planning: heirs who inherit a Roth IRA receive tax-free withdrawals, which can be a cleaner transfer than a traditional IRA that taxes every dollar the heir eventually takes out.

The common thread is a bet on tax rates. Converting makes the most sense when you expect your tax rate today, or your heirs' tax rate, to be lower than the rate that would otherwise apply down the road, for example in a low-income year, early in retirement before Social Security and RMDs start, or before an expected rate increase.

How is a Roth conversion taxed?

The converted amount is added to your ordinary taxable income for the year, exactly as if you had earned it in wages. It is not a separate, lower-taxed category of income. If you convert $40,000, your taxable income for the year goes up by $40,000, and that amount is taxed at whatever your marginal bracket happens to be once it's stacked on top of your other income. There is one important detail on how you pay: if you have tax withheld from the converted funds themselves rather than paying the bill from outside savings, the withheld portion is treated as a distribution, not a conversion. That means it can owe both income tax and, if you are under 59½, the 10% early-withdrawal penalty on top. Most people who convert pay the resulting tax bill from a separate bank or brokerage account so the entire converted balance keeps working inside the Roth IRA.

Source: IRS Revenue Procedure 2025-32, 2026 marginal tax brackets, single filers. Federal income tax only; state tax, the Additional Medicare Tax, and IRMAA are not included.

Worked example. Take the second row. You are single with $60,000 in taxable income for 2026, which sits inside the 22% bracket ($50,400 to $105,700). You convert $50,000 from a traditional IRA to a Roth IRA. Your taxable income becomes $110,000. The first $45,700 of the conversion (from $60,000 up to the top of the 22% bracket at $105,700) is taxed at 22%, or $10,054. The remaining $4,300 (from $105,700 to $110,000) spills into the 24% bracket, taxed at 24%, or $1,032. Total federal tax on the conversion: $11,086, an effective rate of 22.2% on the $50,000, even though you started in the 22% bracket. The same $50,000 conversion costs $7,960 for someone starting at $20,000 of income and $17,688 for someone starting at $600,000, purely because of where it stacks on top of existing income.

What is the pro-rata rule for Roth conversions?

If every dollar in your traditional IRAs came from deductible contributions, the whole conversion is taxable, full stop. It gets more complicated if you also hold after-tax (nondeductible) contributions, dollars you contributed to a traditional IRA but never deducted, tracked on IRS Form 8606. The IRS does not let you cherry-pick which dollars you convert. Instead, it applies an aggregation rule: it treats every traditional, SEP, and SIMPLE IRA you own as one combined pot, and the taxable share of any conversion is the pot's pre-tax share of the total.

Worked example. Say you have $95,000 of pre-tax money and $5,000 of after-tax (nondeductible) basis across all your traditional, SEP, and SIMPLE IRAs combined, a $100,000 total. You convert $20,000. The nontaxable fraction is $5,000 divided by $100,000, or 5%. So 5% of the conversion, $1,000, comes out tax free, and the remaining $19,000 is taxable, even if you meant to convert "just the after-tax part." Employer plan balances, like a current 401(k), are not part of this pool, which is why some people roll their pre-tax IRA money into a 401(k) first, leaving only after-tax basis behind to convert cleanly.

What is the 5-year rule for a Roth conversion?

This is a different 5-year rule from the one that governs tax-free withdrawal of earnings on a Roth IRA (covered in our Roth IRA explainer). Each conversion starts its own separate five-year clock, running from January 1 of the year you convert, that determines whether the 10% early-withdrawal penalty applies if you pull that converted money back out before age 59½. Because you already paid income tax on the conversion, withdrawing converted principal early does not trigger income tax again, but it can still trigger the 10% penalty if both conditions are true: you are under 59½ and it has been less than five years since that specific conversion. Convert in three different years and you have three different five-year clocks running at once. Withdrawals are taken in a set order (contributions first, then conversions oldest-first, then earnings last), so it matters which conversion's money you are actually pulling from.

What is a Roth conversion ladder?

A conversion ladder is a strategy for reaching converted money before 59½ without the penalty: convert a chunk of a traditional account to Roth each year, let each year's conversion clear its own five-year waiting period, then withdraw that year's converted principal penalty-free once it does. Run it for several years in a row and you build a "ladder" of conversions that keeps maturing, so a slice becomes penalty-free every year. It is mainly used by people who retire early and need to bridge the years before 59½ with something other than a taxable brokerage account, and it requires enough outside savings to cover living expenses during the first five years, since no rung of the ladder is accessible penalty-free until its own clock runs out.

Can a Roth conversion push you into a higher tax bracket?

Yes, and this is the more immediate of the two gotchas. Because the entire converted amount is added on top of your other income for the year, a large conversion can carry you across one or more bracket lines, as the table above shows: the same $50,000 conversion can land entirely in one bracket or spill across two, depending on your other income that year. It can also affect anything else tied to your tax return, like the taxability of Social Security benefits or eligibility for income-based tax breaks, since those generally look at the same taxable income figure that the conversion just inflated. This is why conversions are often sized deliberately, converting only enough to "fill up" the current bracket rather than converting an entire account balance in one year.

Does a Roth conversion raise Medicare premiums (IRMAA)?

Yes, and this is the delayed gotcha. Medicare Part B and Part D premiums include an income-based surcharge called IRMAA (Income-Related Monthly Adjustment Amount), and it is not based on this year's income. It looks back two years, so a large conversion this year can raise your Medicare premiums two years from now, often catching people by surprise because the tax return and the higher premium notice arrive so far apart. Our sister site covers how Roth conversions raise IRMAA in detail, including the current income tiers and appeal options; we keep this page focused on the conversion mechanics rather than duplicating that.

The bottom line

A Roth conversion is not free money and not a loophole, it is a choice to pay tax now instead of later, in exchange for tax-free growth, no RMDs, and a cleaner inheritance for your heirs. The math only works in your favor if your tax rate on the conversion, today, is lower than the rate you would otherwise pay on that same money down the road. Convert too much in one year and you can push yourself into a higher bracket immediately and a higher Medicare premium two years later, both entirely avoidable by converting smaller amounts spread across more years instead of one large lump sum. If you hold both pre-tax and after-tax money across your traditional IRAs, run the pro-rata math before you convert, since you cannot simply choose to convert the tax-free portion first. This page explains the mechanics; it is not tax advice, and the right conversion amount for your own return depends on numbers only your own tax filing can answer. See Roth IRA vs traditional IRA for the account basics and 2026 contribution limits for every retirement account limit in one place.