Chapter 9: Roth conversions: filling brackets on purpose
Carlos and Elena can take a dollar out of their traditional IRA this year and hand the IRS 12 cents. Leave that same dollar alone, and when required withdrawals begin it will likely cost 24 cents, and if one of them is filing alone by then, more still. Multiply by a few hundred thousand dollars of IRA balance and this quiet December decision outweighs a decade of clever fund picking. The tool is the Roth conversion: moving money from a traditional IRA or 401(k) into a Roth, paying ordinary income tax on the amount now, and never paying tax on it again. There is no income limit, no contribution cap, and no rule against converting six figures at once. The skill is choosing how much, and when.
The window: when the tax code goes quiet
Most working lives end with a strange interlude the tax code rewards lavishly. The paycheck stops at retirement. Social Security, for many people, starts at 70, because waiting grows the benefit. Required minimum distributions (RMDs), the forced annual withdrawals from traditional accounts, begin at 73 or 75 depending on birth year; for Carlos and Elena's birth years, 75. Between those events sits a stretch of artificially low income: the conversion window. Inside it, brackets that a salary kept out of reach for forty years sit nearly empty, and money can leave the traditional pot at 10% and 12% instead of the 22% or 24% the RMD years will charge.
The rate on every dollar Carlos and Elena convert this year, up to $100,800 of joint taxable income.
The likely rate on the same dollars at 75, after Social Security and required withdrawals stack up, and higher for a surviving spouse.
The window is not forever. It narrows when Social Security starts and slams shut when RMDs begin, because both fill the low brackets with income you no longer control. The years between retirement and 70 are the wide-open stretch, and each one that passes unconverted is bracket space that expires worthless on December 31.
Filling the 12% bracket, traced
Bracket filling is the discipline that makes conversions pay: convert exactly enough to reach the top of a chosen bracket, and stop. The bracket staircase from Chapter 1 does the work, since every converted dollar lands on the next empty step.
Their income is the familiar $72,000 from Chapter 4: a $40,000 pension plus $32,000 of IRA withdrawals for living costs. After the $32,200 standard deduction, taxable income is $39,800, deep in the 12% bracket, which runs to $100,800 on a joint return. That leaves $61,000 of room. In mid-December, once every 1099 is known, they convert $48,000, lifting taxable income to $87,800 and keeping a $13,000 buffer against surprises like a late fund distribution. Every converted dollar lands on the 12% step: $5,760 of tax. Their total federal bill rises from $4,280 to $10,040, and $48,000 now compounds where no tax will ever touch it again.
The same trace shows what waiting costs. Left in the IRA at 7%, that $48,000 grows to about $101,000 by the year Carlos turns 75, and RMDs then push it out at 22% or 24% under today's brackets: $22,000 to $24,000 of tax instead of $5,760. Converted, it grows to the same $101,000 inside the Roth with the meter already off. Twelve cents per dollar now, or 22 to 24 cents per dollar later on a larger number; the window exists so you can pick the smaller bill on purpose. From the year Carlos turns 65, the $6,000 senior deduction from Chapter 2 widens the room slightly, though it phases out above $150,000 of joint MAGI, one more reason conversions stay measured.
The calculator above does this sizing live: enter your income and it shows how much conversion room each bracket holds, with the IRMAA warning line drawn in. Ten minutes with it before any December conversion is time well spent.
The four taxes hiding behind a conversion
A conversion's bracket math is the visible cost. Four quieter costs decide whether the move actually pays, and every one of them runs on MAGI, the modified adjusted gross income that a conversion raises dollar for dollar.
IRMAA, the Medicare surcharge with a long memory
Medicare premiums rise once MAGI passes $109,000 single or $218,000 joint (2026), based on the tax return from two years earlier: 2024 income set 2026 premiums, and this year's conversion sets premiums two years out. These are cliffs, not phase-ins. One dollar over the line raises every month of both spouses' Part B and Part D premiums for a full year, typically well over $1,000 for a couple. Carlos and Elena's $120,000 MAGI clears the line with room to spare; a $150,000 conversion would not have. From 63 on, every conversion needs this two-year look ahead.
Social Security taxation
Depending on your other income, up to 85% of Social Security benefits become taxable, and conversion income is exactly the kind that drags more of the benefit into tax. Converting before benefits begin sidesteps the interaction entirely, which is one more reason the early window years, before 70, are the valuable ones.
The capital-gains push
Chapter 4's stacking rule cuts the other way here: conversion income is ordinary income, so it fills the cup underneath long-term gains and shoves them upward. A dollar converted at 12% that pushes a gain dollar from the 0% zone into 15% costs 27 cents, not 12. The window is one pot of headroom: Chapter 4's $40,000 gain harvest and this chapter's $48,000 conversion do not fit in the same year at full size, so Carlos and Elena alternate years or split the room.
ACA subsidies
Elena is 62 and buys marketplace health coverage until Medicare. Premium subsidies shrink as MAGI rises, so each converted dollar can quietly cost subsidy on top of its tax, a shadow rate that varies by income and by year. Size conversions with the marketplace calculator open, or keep them small until both spouses reach 65. A CPA earns their fee here.
The widow's penalty
The hardest argument for converting is the one couples least want to model. When one spouse dies, the survivor files as single from the following year, with roughly half the bracket widths and half the standard deduction, while keeping most of the income: the larger Social Security check, the pension or its survivor benefit, and both IRAs now consolidated under one set of RMDs.
| Same $90,000 of taxable income | Married filing jointly | Single |
|---|---|---|
| Federal tax (2026 brackets) | $10,304 | $14,512 |
| Marginal rate | 12% | 22% |
| IRMAA cliff (MAGI) | $218,000 | $109,000 |
That is $4,208 a year more tax on identical income, a 22% marginal rate instead of 12%, and a Medicare surcharge threshold cut in half, every year, for the rest of the survivor's life. Conversions made while both spouses are alive run the money through the wide joint brackets one last time. Every dollar converted together at 12% is a dollar the survivor will never withdraw alone at 22% or 24%.
Pay the tax from cash, not from the conversion
When the brokerage asks whether to withhold tax from the conversion, decline if you can. Withholding 12% from a $48,000 conversion sends only $42,240 to the Roth; the other $5,760 detours to the IRS without ever becoming tax-free money. Paying the $5,760 from a taxable savings account instead moves the full $48,000 into shelter, which quietly converts taxable cash into Roth value at no extra cost. For anyone under 59½, withholding is worse still, since the withheld amount counts as an early withdrawal with a 10% penalty. Carlos and Elena are past that line, so for them it is purely about not wasting Roth space. The practical rule: a conversion is only fully funded when the tax money is sitting in cash outside the IRA before you click convert.
Convert every December of the window, after the year's income is known: fill to the top of your chosen bracket, leave a buffer, check the IRMAA cliff two years ahead and this year's gains stack, and pay the tax from cash. A plan of modest annual conversions beats one giant year at 24% plus a Medicare surcharge, every time.
That rule encodes the multi-year mindset. The goal is never to empty the IRA in one dramatic year; it is to spread the traditional balance across every low-bracket year the window offers, so no single year spikes into high brackets or over a cliff. Model the whole stretch, not the next return.
Where people go wrong
- Converting a huge lump in year one. A $300,000 conversion burns through the 22% and 24% brackets and over the IRMAA cliff; the same money spread across six Decembers mostly rides the 12% step.
- Ignoring the two-year lookback at 63 and 64. Those returns set the first Medicare premiums, and the surcharge arrives exactly when the paycheck is gone.
- Paying the conversion tax out of the conversion. Withholding shrinks the amount that reaches the Roth, and adds a 10% penalty under 59½.
- Converting in January. Conversions became permanent in 2018, and in January you know nothing about the year's income. December is sizing season.
- Stacking a full conversion on a 0% gain harvest. The two strategies share one pot of headroom, and run together they push gains into 15% at a 27-cent combined rate.
- Forgetting state tax. Most states tax conversions as ordinary income, and a planned move to a no-tax state can be worth sequencing first (Chapter 13).
Key takeaways
- The conversion window is the low-income stretch between retirement, Social Security at 70, and RMDs at 73 or 75; inside it, traditional money leaves at 12% instead of 22–24%.
- Carlos and Elena convert $48,000 on top of $72,000 of income: taxable income rises to $87,800, all of it inside the 12% bracket, for $5,760 of tax and a $13,000 buffer.
- Conversions raise MAGI, which can trip IRMAA two years later ($109,000 single / $218,000 joint cliffs), tax more Social Security, push gains out of the 0% zone, and shrink ACA subsidies before 65.
- The widow's penalty is real: the same $90,000 of taxable income costs $4,208 more on a single return, at a 22% marginal rate, with the IRMAA threshold halved.
- Pay the tax from taxable cash so the full conversion reaches the Roth, and size conversions every December across the whole window rather than gorging in one year.
Sources: IRS: Publication 590-A · IRS: Publication 590-B · IRS: 2026 Tax Inflation Adjustments · IRS: Federal Income Tax Rates and Brackets · Medicare IRMAA Income Brackets