Roth Conversions for High Earners: When They Make Sense and When They Don't

A Roth conversion makes sense when the tax rate you pay on the converted amount today is lower than the rate you, or your heirs, would otherwise pay on that money later. For high earners, the best opportunities are usually the gap years between retirement and required minimum distributions, low-income years between liquidity events, and market drawdowns. Conversions are usually a mistake at peak earnings in the 37 percent bracket, when the tax must be paid from the IRA itself, or when the dollars are ultimately destined for charity.

How does a Roth conversion work?

A conversion moves money from a traditional IRA or eligible employer plan into a Roth IRA. The converted amount is taxed as ordinary income in the year of conversion; in exchange, future growth and qualified withdrawals are income tax free, and Roth IRAs have no lifetime required minimum distributions for the original owner.

Two mechanics matter. First, conversions have been irrevocable since the Tax Cuts and Jobs Act eliminated recharacterization in 2018, so the analysis must be done before, not after. Second, there is no income limit on conversions; anyone may convert any amount, which is why conversions, not contributions, are the main Roth entry point for high earners.

When do conversions make sense for high earners?

The classic window opens at retirement and closes when required minimum distributions begin, at age 73 for most current retirees and age 75 for those born in 1960 or later under SECURE 2.0. In those years, wages stop, RMDs have not started, and taxable income can fall two or three brackets. Filling the lower brackets with deliberate conversions can permanently shift money from a future 32 to 37 percent environment into a 22 to 24 percent one.

Other windows include a sabbatical or transition year between roles, the years after a business sale when ordinary income is low, a planned move from a no-income-tax state in reverse (convert before moving to a high-tax state), and sharp market declines, when the same number of shares can be converted at a temporarily lower tax cost.

The estate angle is often the deciding factor. Under the SECURE Act, most non-spouse beneficiaries must empty an inherited IRA within ten years. Adult children who inherit a large traditional IRA during their own peak earning years can lose a third or more of it to income tax. Converting at the parents' 24 percent rate so children avoid withdrawals at 35 or 37 percent can be a meaningful wealth transfer in itself, and with the federal estate exemption now $15 million per person, income tax planning is the binding constraint for many families. Paying conversion tax from taxable assets also quietly shrinks the taxable estate.

What is the IRMAA trap?

Medicare premiums are means-tested through the income-related monthly adjustment amount (IRMAA). For 2026, surcharges begin when modified adjusted gross income exceeds $109,000 for single filers or $218,000 for joint filers, layered on top of the standard Part B premium of $202.90 per month, according to published 2026 Medicare figures. There are multiple tiers, and the top tier begins at $500,000 single and $750,000 joint.

IRMAA is a cliff, not a slope: one dollar over a threshold triggers the full surcharge for both spouses for a full year, and it is based on MAGI from two years earlier. A conversion in 2026 affects premiums in 2028. For retirees on Medicare, conversion sizing should target a specific IRMAA tier, not just a tax bracket, and it is often rational to accept one tier of surcharge in exchange for a large bracket arbitrage, but to do so knowingly.

A worked example (hypothetical)

A married couple, both 66 and retired, hold a $3 million traditional IRA and substantial taxable assets. Their 2026 taxable income before any conversion is $120,000, leaving most of the 22 and 24 percent brackets empty. Under IRS Revenue Procedure 2025-32, the 24 percent bracket for joint filers runs to $403,550 of taxable income.

They convert $283,550, filling the brackets exactly. The first $91,400 is taxed at 22 percent ($20,108) and the remaining $192,150 at 24 percent ($46,116), about $66,200 in total, an average rate near 23.4 percent, paid from their taxable account. Without conversions, projected RMDs in their late 70s would push them into the 32 percent bracket, and the survivor would later face the same income at compressed single-filer brackets. The couple accepts a higher IRMAA tier in 2028 as a known cost of the strategy. This example is hypothetical and ignores state tax, which matters.

When conversions do not make sense

• During peak earning years, when conversion income stacks on top of a 35 or 37 percent salary.
• When the tax must be paid from the IRA itself, especially before age 59.5, where the withheld amount can also incur a 10 percent penalty.
• When the IRA is earmarked for charity; qualified charitable distributions and charitable bequests pass IRA dollars to charity with no income tax at all.
• When you expect materially lower future rates, for example a coming move to a state with no income tax.
• When conversion income would trigger collateral damage that outweighs the benefit, such as the SALT cap phase-down above $505,000 of MAGI or top IRMAA tiers.

Key numbers for 2026

Frequently asked questions

Is there an income limit on Roth conversions?No. Income limits apply to Roth IRA contributions ($242,000 to $252,000 phase-out for joint filers in 2026), but anyone may convert any amount at any income level.

Can I undo a conversion if markets fall afterward?No. Recharacterization of conversions was eliminated beginning in 2018, so conversions are permanent once executed.

Should I pay the conversion tax from the IRA?Generally no. Paying from taxable assets keeps the full converted amount growing tax free and avoids potential early-withdrawal penalties on the amount withheld.

How do conversions interact with Medicare premiums?Conversion income counts toward IRMAA with a two-year lag, and the thresholds are cliffs. Sizing conversions to a chosen IRMAA tier, not just a tax bracket, avoids surprises.

Are Roth conversions better before or after the estate exemption increase?The $15 million exemption makes estate tax irrelevant for many families, which raises the relative importance of income tax planning. Conversions aimed at heirs' brackets under the 10-year rule have become more, not less, relevant.

Is a series of small conversions better than one large one?Usually. Annual conversions sized to fill a target bracket smooth the tax cost and preserve flexibility if rates, health, or markets change.