Convert vs Keep Analysis
Last reviewed: May 2026
A Roth conversion moves money from a pre-tax retirement account (traditional IRA, 401(k), or similar) into a Roth IRA. You pay income tax on the converted amount now, but the money then grows and can be withdrawn completely tax-free in retirement. The fundamental question is whether paying tax now at your current rate is better than paying tax later at your future rate. When done strategically — during low-income years, in lower tax brackets, or well before retirement — conversions can save tens or hundreds of thousands in lifetime taxes.1
| Conversion Amount | 22% Bracket Tax | 24% Bracket Tax | 32% Bracket Tax |
|---|---|---|---|
| $25,000 | $5,500 | $6,000 | $8,000 |
| $50,000 | $11,000 | $12,000 | $16,000 |
| $100,000 | $22,000 | $24,000 | $32,000 |
| $200,000 | $44,000 | $48,000 | $64,000 |
*Federal tax only. State income tax adds 0–13% depending on your state. Assumes all converted income stays within the indicated bracket.
| Scenario | Conversion Likely Wins | Conversion Likely Loses |
|---|---|---|
| Current vs future bracket | Lower bracket now | Higher bracket now than expected in retirement |
| Time horizon | 10+ years to retirement | Converting within 5 years of needing the money |
| Tax payment source | Paid from outside funds | Paid from the converted amount |
| Tax rate expectations | Expect rates to rise | Expect rates to fall |
| RMD management | Large traditional IRA → forced high RMDs | Small traditional IRA with manageable RMDs |
| Estate planning | Want tax-free inheritance | No estate planning goals |
Rather than converting a large lump sum and triggering a high tax bracket, the bracket-filling approach converts just enough each year to stay within your current bracket. If you're in the 22% bracket with $15,000 of room before hitting 24%, convert exactly $15,000. Repeat annually. Over 10–15 years, you can convert a substantial traditional IRA balance while never paying more than 22% on any of it. This is especially powerful in the gap years between retirement and when RMDs and Social Security begin — income is often at its lowest, creating a wide conversion window.2
A Roth conversion moves money from a traditional IRA or 401(k) — where contributions were tax-deductible and growth is tax-deferred — into a Roth IRA, where future qualified withdrawals are completely tax-free. The tradeoff is immediate: the converted amount is added to your taxable income in the year of conversion. On a $50,000 conversion at a 22% marginal rate, you owe approximately $11,000 in additional federal income tax. The strategic question is whether paying that tax now produces better long-term results than paying taxes later on traditional IRA withdrawals at unknown future rates.
| Conversion Amount | Tax at 22% | Tax at 24% | Tax at 32% |
|---|---|---|---|
| $25,000 | $5,500 | $6,000 | $8,000 |
| $50,000 | $11,000 | $12,000 | $16,000 |
| $75,000 | $16,500 | $18,000 | $24,000 |
| $100,000 | $22,000 | $24,000 | $32,000 |
*Federal tax only. State taxes, IRMAA surcharges, and ACA subsidy impacts may apply.
The ideal conversion window is any period when your taxable income is temporarily lower than it will be in the future. Common scenarios include the gap years between retirement and the start of Social Security and RMDs (typically ages 62–72), a year of job transition or sabbatical, early career years before peak earnings, and years with large deductions (medical expenses, business losses, charitable contributions). During these windows, you can convert at lower marginal rates than you would face when RMDs, Social Security, and other income sources combine in later years.
The math favors conversion when your current marginal rate is lower than your expected future withdrawal rate, when you can pay the conversion tax from non-retirement funds (preserving the full converted balance for tax-free growth), and when you have a long time horizon for the Roth funds to grow. A 55-year-old who converts $50,000 at 22% and lets it grow at 7% for 15 years ends up with approximately $137,952 in tax-free Roth funds. Leaving that same $50,000 in a traditional IRA would produce the same $137,952 but subject to income tax on withdrawal — netting roughly $107,000 after a 22% tax rate, or even less if rates have increased.
The most disciplined conversion approach fills your current tax bracket without spilling into the next one. If a married couple filing jointly has $80,000 in taxable income and the 22% bracket ends at $96,950, they can convert up to $16,950 at the 22% rate. Each dollar above $96,950 would be taxed at 24%. By converting exactly the bracket space each year over multiple years, retirees can systematically move hundreds of thousands of dollars from traditional to Roth accounts at the lowest possible marginal rate. This strategy requires recalculating each year because income, deductions, and bracket thresholds change annually.
Roth conversions increase Modified Adjusted Gross Income (MAGI), which can trigger Income-Related Monthly Adjustment Amounts (IRMAA) for Medicare Part B and Part D. IRMAA surcharges are based on income from two years prior — so a large conversion in 2025 affects Medicare premiums in 2027. A single filer whose MAGI exceeds $106,000 (2025 threshold) pays an extra $60–$234 per month in Part B premiums, totaling $720–$2,808 annually. When planning conversions, the IRMAA cost must be factored into the break-even analysis. In some cases, keeping the conversion just below an IRMAA threshold saves thousands in Medicare surcharges, making a slightly smaller conversion the better overall strategy.
For early retirees purchasing health insurance through the ACA marketplace (before Medicare eligibility at 65), Roth conversions increase MAGI and can reduce or eliminate premium subsidies. A 60-year-old couple paying $2,000/month for marketplace insurance might receive $1,200/month in subsidies at $60,000 MAGI. A $50,000 Roth conversion pushing MAGI to $110,000 could eliminate those subsidies entirely, effectively adding $14,400 in healthcare costs to the conversion's tax bill. For marketplace enrollees, conversion planning must account for the subsidy cliff — the income level above which subsidies phase out rapidly.
The break-even point is the number of years needed for tax-free Roth growth to offset the upfront conversion tax. The calculation depends on your current tax rate, expected future tax rate, investment returns, and whether you pay the conversion tax from the converted funds or external sources. Paying from external funds is always better — it keeps the full converted amount growing tax-free. At a 22% conversion rate with 7% annual returns and the tax paid externally, the break-even point is approximately 0 years if your future withdrawal rate is also 22% (since you're indifferent), and becomes increasingly favorable the longer the money grows. If future rates rise to 25%, the Roth wins from day one.
High-income earners above the Roth IRA direct contribution limits ($161,000 MAGI for single, $240,000 for married in 2025) can access Roth accounts through two strategies. The Backdoor Roth involves contributing to a traditional IRA (non-deductible at high incomes) and immediately converting to a Roth. The Mega Backdoor Roth, available through some employer 401(k) plans that allow after-tax contributions and in-plan conversions, enables contributing up to $46,500 in after-tax dollars (the gap between the $70,000 total limit and the $23,500 employee limit) and converting them to Roth. These strategies are legal and widely used, though the pro-rata rule on traditional IRA conversions requires careful planning if you have existing pre-tax IRA balances.
Each Roth conversion has its own five-year clock for penalty-free withdrawal of the converted principal. Withdrawing converted funds before age 59½ and before the five-year period triggers a 10% early withdrawal penalty on the conversion amount. This rule applies to the converted principal, not the earnings, and each conversion year starts its own separate clock. For early retirees planning to use Roth conversion ladders before 59½, this means planning conversions at least five years before the funds are needed for living expenses.
→ Use the bracket-filling strategy. Convert just enough each year to stay in your current bracket. This maximizes value and minimizes tax cost over time.
→ Target the gap years. Between retirement and age 73 (when RMDs begin) is often the lowest-income period of your life — the ideal conversion window.
→ Pay taxes from outside funds. Never raid the conversion to pay the tax bill. It permanently reduces your tax-free compounding base.
→ Watch for Medicare IRMAA. Large conversions can push modified AGI above IRMAA thresholds, increasing Medicare Part B and D premiums for 2 years. Plan around these cliffs.
See also: Roth IRA · Backdoor Roth · Tax Brackets · Retirement