Who Should Do a Roth Conversion?

Your Tax Bracket Is the Wrong Test

Most advisors agree on one rule: don’t convert in a high bracket. That rule is wrong.

Your bracket tells you what a conversion costs. It says nothing about whether you get the money back. Two retirees in the same 32% bracket can get opposite answers, because one has a way to recover the tax and the other doesn’t.

Two questions decide it.

Can you pay the tax from outside the IRA? If the bill comes out of the IRA itself, you’re paying tax on the money you’re using to pay tax.

Do you have a plan to recover it? A conversion trades a big bill now for tax-free income later. With no plan to earn that back, you’re paying the IRS early and hoping.

Answer no to either one and you’re one of the two retirees who should never convert. Everyone else is on the list below.

The Nine Retirees

The Seven Who Should Convert

1. The forever high earner

You have a high income and intend to keep it, so advisors say never convert. But the low-bracket window you’re waiting for is never going to open. Converting once at a high rate buys decades of income that generates little reportable income, less exposure to Medicare surcharges, and less tax on Social Security.

2. The RMD tax bomb

Required distributions now start at 73 for those born 1951 through 1959, and 75 for anyone born in 1960 or later. Every delay compounds the problem.

A 60-year-old with $4 million growing at 8% faces a first RMD above half a million at 75, landing in the 32% to 35% brackets immediately. The balance grows faster than the withdrawals, so the 37% bracket arrives within a few years and the forced withdrawal passes a million by the mid-80s. Converting early is the only thing that defuses it. The five-bucket RMD approach covers the sequencing.

3. The minimalist

You’re in the 12% or 22% bracket, so a conversion looks like a solution to a problem you don’t have. Two things get missed. Low isn’t the same as lowest. And the jump from 22% to 24% costs two points, with that bracket running to roughly $200,000 single and $400,000 joint. You can convert far more than you think before the marginal cost moves. The 2026 bracket tables show the lines.

4. The IRMAA-sensitive

Yes, converting can raise your Medicare premiums. But IRMAA recalculates every year, so it isn’t permanent. And a large IRA triggers IRMAA anyway once RMDs begin.

The real choice isn’t IRMAA versus no IRMAA. It’s a few years of IRMAA now, or IRMAA for life. One timing note: the surcharge uses a two-year lookback, so income at 63 sets premiums at 65. Do your biggest conversions before 63 if you can. How the tiers work.

5. The charitable giver

QCDs let you give from an IRA tax-free after 70½, which sounds like it replaces conversions. It caps at $111,000 per person for 2026, and a $2.7 million IRA at 75 already produces an RMD near that. It also assumes you want to give away $111,000 every year.

QCDs handle money you give away. Conversions handle money you keep. Most charitable retirees need both.

6. The spousal protector

When one spouse dies, the survivor files single within a year or two. Single brackets are about half as wide, and the IRMAA thresholds compress the same way. Income doesn’t fall by half, though: the smaller Social Security check disappears but the RMDs continue. That’s a permanent tax increase arriving right after a death, and converting while both of you are alive prevents it.

7. The legacy planner

Under the SECURE Act, most children who inherit your IRA have ten years to empty it, taxed on every dollar, usually during their peak earning years. Heirs cannot convert an inherited IRA to a Roth. The option you have doesn’t exist for them. They pay at their rate with no way to recover it.

How to Recover the Tax Hit Faster

Standard advice says a conversion takes a decade to break even, because you’re waiting for tax-free growth to exceed the tax you paid. Converting into a contract that pays a guaranteed annual amount shortens that considerably.

A Hybrid Pension is a fixed indexed annuity with a lifetime income rider. The account stays yours, can grow, and passes to your beneficiaries. The rider pays a guaranteed income for life even if the account reaches zero. Unlike a SPIA or DIA, nothing is surrendered irrevocably, which is what makes a conversion possible at all. More on the structure.

The payout rate isn’t an investment return. It works like Social Security: a payment calculated from your deposit, your age, and how long you wait. Deferring produces a bigger check.

Three Things This Math Doesn’t Cover

Part of each payment is your own principal coming back. Cash flow recovers quickly. That isn’t the same as being made whole on net worth.

Money spent on taxes stops compounding. The cost is real and it arrives first. Decades of tax savings can outweigh it, but not immediately.

Converting an annuity inside an IRA may be taxed on more than its cash value. Treasury rules generally use the contract’s fair market value, which can include rider value. That lengthens every break-even figure above. Confirm with your tax professional and the carrier first.

Roth distributions are also tax-free only after the five-year rule is satisfied.

Getting Your Own Numbers

Payout rates move with age, state, carrier, and current rates. Your tax rate depends on where you live and what else you earn.

KCIIS represents more than 50 plans across all 50 states and charges nothing for consultations, because the carrier pays the firm rather than the client.

Frequently Asked Questions