Roth Conversion Strategy for 2026: A Bracket-Filling Guide

If you've been hearing the phrase "Roth conversion" tossed around at dinner parties or in financial podcasts, there's a good reason: 2026 might be one of the best years in recent memory to actually do one. The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently locked in the lower tax brackets from the Tax Cuts and Jobs Act — the same rates that were originally set to expire. That means the window for strategic Roth conversions isn't slamming shut anytime soon, but the math still favors acting now, especially if you're in a lower tax bracket than you expect to be in retirement.

Let me walk you through exactly how Roth conversions work, why 2026 is a smart year to consider one, and how to figure out the right amount to convert without triggering nasty surprises.

What Is a Roth Conversion, Exactly?

A Roth conversion is when you move money from a traditional IRA (or 401(k) that's been rolled into a traditional IRA) into a Roth IRA. The trade-off is simple: you pay income taxes on the converted amount now, but that money — and everything it earns going forward — grows completely tax-free. You'll never owe another dollar of tax on it, not when you withdraw it in retirement, not when you pass it on to heirs.

Think of it like prepaying your tax bill at today's rates to avoid potentially higher rates later. If you're currently in the 12% bracket but expect to be in the 22% bracket in retirement (which is more common than you'd think, especially once Social Security, required minimum distributions, and pension income stack up), every dollar you convert now saves you 10 cents on the dollar in future taxes.

Why 2026 Is a Strong Year for Conversions

The OBBBA made the 2017 tax rates permanent, which means the 2026 federal brackets look like this:

For Single Filers

• 10% on the first $12,400 of taxable income
• 12% on income from $12,401 to $50,400
• 22% on income from $50,401 to $105,800
• 24% on income from $105,801 to $201,050

For Married Filing Jointly

• 10% on the first $24,800
• 12% on income from $24,801 to $100,800
• 22% on income from $100,801 to $211,400
• 24% on income from $211,401 to $402,100

The standard deduction for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly, according to the IRS inflation adjustments released earlier this year. That deduction shelters a chunk of income before you even hit the first bracket.

Here's where it gets interesting. According to Mercer Advisors, a married couple with no other taxable income in 2026 could convert roughly $133,000 into a Roth IRA and stay entirely within the 12% bracket — paying a blended effective rate of about 10%. That's a huge amount of money moving into a tax-free bucket at a bargain rate.

The Bracket-Filling Strategy, Step by Step

The most common approach to Roth conversions is called "bracket filling." The idea is straightforward: you convert just enough each year to fill up your current tax bracket without spilling into the next one. Here's how to figure out your number:

1. Estimate Your Taxable Income for 2026

Add up wages, Social Security benefits (the taxable portion), pension income, rental income, interest, dividends, and any other income. If you're retired and living off savings, this number might be surprisingly low — which is exactly the opportunity.

2. Subtract Your Standard Deduction

For a married couple, that's $32,200. If you itemize, use your itemized total instead. The result is your taxable income before any conversion.

3. Find Your Bracket Ceiling

Look at the brackets above. If your taxable income puts you at $60,000 as a married couple, you're in the 12% bracket, which tops out at $100,800. That means you have $40,800 of "room" before you'd cross into the 22% bracket.

4. Convert That Amount (or Less)

You'd convert up to $40,800 from your traditional IRA to your Roth IRA. All of it would be taxed at 12%. You'll owe about $4,896 in additional federal taxes on that conversion — but the $40,800 (plus decades of growth) will never be taxed again.

The Real Power: Tax-Free Compounding

Here's the number that makes financial planners' eyes light up. According to analysis from multiple tax advisory firms, a $100,000 Roth conversion growing at 7% annually for 25 years becomes roughly $542,743 — completely tax-free. If that same $100,000 had stayed in a traditional IRA and been taxed at 22% on withdrawal, you'd net about $423,339 after taxes. That's a difference of over $119,000 — just from paying taxes at a lower rate today.

Even smaller conversions add up. Converting $30,000 a year for five years at the 12% bracket gives you $150,000 in Roth money that could grow to over $400,000 in 20 years, all tax-free.

The Medicare Trap You Need to Watch

This is where a lot of people get burned, and it's the single most important pitfall to understand before doing a Roth conversion.

Medicare Part B and Part D premiums are income-based. If your modified adjusted gross income (MAGI) crosses certain thresholds, you'll pay an Income-Related Monthly Adjustment Amount — IRMAA for short. For 2026, the IRMAA thresholds start at $109,000 for single filers and $218,000 for married couples filing jointly. But here's the critical detail: IRMAA uses a two-year lookback. Your 2026 income determines your 2028 Medicare premiums.

The thresholds are cliff-based, not gradual. Being even $1 over the first threshold triggers the full surcharge — roughly $2,297 per year for a couple, according to Medicare.gov. That can easily wipe out the tax savings from a conversion if you're not careful.

The fix? Run the numbers before you convert. If you're near Medicare age, keep your total MAGI (including the conversion amount) below the nearest IRMAA threshold. Sometimes it's worth converting $5,000 less to avoid a $2,300 surcharge.

The Golden Window: Between Retirement and Age 73

If you're between retirement and age 73 — the age when required minimum distributions (RMDs) from traditional IRAs and 401(k)s kick in — you're sitting in the sweet spot for Roth conversions. Your income is likely lower than it was during your working years, and RMDs haven't started pushing you into higher brackets yet.

This period, sometimes called the "gap years," is when your tax bracket is often at its lowest. Once RMDs begin, they'll be added to Social Security and any other income, potentially pushing you into the 22% or even 24% bracket. Converting during the gap years lets you shrink your traditional IRA balance before RMDs force withdrawals at higher rates.

And here's a bonus: Roth IRAs have no RMDs. Money you convert doesn't have to come out on any schedule, which gives you much more flexibility in retirement and can be a powerful tool for estate planning.

Three Rules You Can't Ignore

The 5-Year Rule

Each Roth conversion has its own five-year clock. If you withdraw the converted amount before five years have passed (and you're under 59½), you'll pay a 10% early withdrawal penalty on the converted amount. The earnings portion has its own five-year rule as well. If you're over 59½, this rule is less of a concern, but it's worth knowing.

The Pro-Rata Rule

If you have both pre-tax and after-tax (non-deductible) contributions in your traditional IRA, you can't cherry-pick which dollars to convert. The IRS treats all your traditional IRA money as one pool and calculates the taxable portion proportionally. If 90% of your combined IRA balance is pre-tax, then 90% of any conversion is taxable — regardless of which account the money comes from.

Pay Taxes from Outside the Conversion

This is a big one. If you convert $50,000 and withhold $10,000 for taxes from the conversion itself, you've only moved $40,000 into the Roth — and that $10,000 withholding is treated as a distribution, potentially triggering penalties if you're under 59½. Always pay the tax bill from a separate checking or savings account to maximize the amount that goes into your Roth.

Is a Roth Conversion Right for You?

A Roth conversion tends to make the most sense if you check one or more of these boxes:

You expect to be in a higher tax bracket in retirement than you are right now. You're in the gap years between retirement and RMDs. You want to reduce future RMDs to manage your taxable income. You plan to leave your Roth IRA to heirs, who'll inherit it tax-free. You have cash outside of retirement accounts to pay the conversion tax bill.

It makes less sense if you're already in a high bracket, you'd need to pull money from the IRA itself to pay the taxes, or you expect your income to drop significantly in the near future.

The Bottom Line

Roth conversions aren't flashy, but they're one of the most powerful tax planning tools available — especially in 2026, with permanently lower brackets and time to let converted money compound tax-free. The key is running your specific numbers: know your bracket, know your IRMAA thresholds, and convert only what makes sense for your situation.

If you're not sure where to start, a fee-only financial advisor or CPA can model the math in about 30 minutes. The upfront cost of advice is almost always worth it when five- and six-figure tax savings are on the table. Your future self — the one withdrawing tax-free money in retirement — will thank you.