Decision Guide · Reviewed 6 September 2026
Convert Traditional to Roth in low-income years to lock in lower tax rates; avoid conversions in high-income years.
Roth conversions move pre-tax Traditional IRA money to Roth (taxable event). You pay tax now, but grow tax-free forever. Best done in years when income is temporarily low (unemployment, sabbatical, between jobs, early retirement before Social Security kicks in).
Conversion mechanics
You have $500K in Traditional IRA. You convert $100K to Roth:
- $100K conversion counts as ordinary income (taxable).
- Tax owed at your bracket (if 32% bracket: $32,000 tax).
- $100K is now in Roth (grows tax-free forever).
- All future growth on that $100K is tax-free.
When conversions make sense
- Early retirement (age 55–67 before Social Security): Low tax bracket years, income from 401k penalty-free (Rule 72(t)). Convert at lower rates.
- Between jobs: Income drop → lower bracket. Convert $50K–$100K to fill lower brackets.
- Market crash: Traditional IRA value down 30%. Convert at lower value, less tax owed, more tax-free growth potential.
- Low-income year: Temporary low income from any cause. Capture low bracket for conversions.
- High-income earner planning ahead: Convert in low years to reduce RMD burden later.
Pro-rata rule trap (watch out)
If you have both Traditional IRA and Roth IRA (or converted balances), IRS pro-rates conversions based on Total IRA balance.
Example: $400K Traditional IRA + $100K Roth IRA = $500K total. Convert $100K of Traditional:
- Pro-rata calculation: 80% of $500K = $400K is Traditional (pre-tax)
- 80% of conversion = $80K is taxable (the $100K conversion is 80% from pre-tax money)
- 20% is non-taxable (from after-tax basis if any)
Solution: Roll Traditional IRA into 401k (if plan allows) to avoid pro-rata rule. Then Roth conversion is 100% taxable but you control the amount.
Tax bracket fill strategy
2024: 24% bracket ends at $191,950 (married). 32% bracket starts at $191,951.
Strategy: In low-income year, calculate how much you can convert while staying in 24% bracket (tax-efficient). Example:
- Income from other sources: $50,000 (low year)
- Room in 24% bracket: $191,950 − $50,000 = $141,950
- Convert $141,950 to Roth → stays in 24% bracket, avoids 32% tax
- Tax owed: $141,950 × 24% = $34,068
- $141,950 now grows tax-free forever
Timing: Best years to convert
- Age 55–66: Before Social Security at 62/67. Low income if retired or transitioning.
- Job loss/sabbatical year: Year with minimal income. Ideal window.
- Market correction: Stock market down 30%; Traditional IRA value reduced. Convert at lower valuation.
- Late December/early January: Straddle years to manage tax brackets across two years.
Conversion vs natural IRA withdrawals
Natural withdrawal (no conversion): Take $100K from Traditional IRA, pay $32K tax (32% bracket), net $68K in hand. Traditional IRA reduced by $100K.
Roth conversion: Convert $100K to Roth, pay $32K tax from separate funds. Roth now has $100K (grows tax-free forever). Traditional reduced by $100K.
Difference: Same tax, but Roth conversion keeps the full $100K invested (not reduced for tax). You've used non-IRA funds to pay the tax.
Avoiding Medicare premium impact
Large conversions increase Modified AGI (MAGI), triggering higher Medicare premiums (Part B/D) at age 65. Estimate carefully if near Medicare age.
Recommendation: Execute large Roth conversions in years when income is temporarily low (unemployment, early retirement, between jobs). Avoid conversions in high-income years unless you have specific reasons (market crash, reducing RMD burden).