A Roth conversion sounds like a smart retirement move. Pay taxes now, enjoy tax-free withdrawals later, and avoid required minimum distributions from your Roth IRA. But what if that decision actually leaves you with less money?
A poorly timed conversion can increase your Medicare premiums, make more of your Social Security taxable, and take away valuable deductions. Some retirees end up paying taxes at rates they could have avoided by waiting.
The surprising truth is that Roth conversions don’t always save money. Here are eight situations where the costs may outweigh the benefits, along with the numbers worth checking first.
1. Your Tax Rate Will Be Lower After You Retire
One of the biggest Roth conversion mistakes is paying a high tax rate today when you could pay a lower rate later. This often happens to people in their late 50s and early 60s who are still earning a good salary.
A Roth conversion moves money from a traditional retirement account into a Roth IRA. The taxable portion of that conversion becomes ordinary income in the year it happens, even if you never spend the money.
Under the 2026 federal income tax brackets, married couples filing jointly enter the 22% bracket when taxable income exceeds $100,800. The 24% bracket begins above $211,400. Internal Revenue Service
Consider a hypothetical couple, both age 62, who earn $170,000 annually while working. They are thinking about converting $100,000 from a traditional IRA because they want to avoid higher taxes later.
However, they expect to retire at 65. Their income could fall significantly once their salaries disappear, potentially leaving them in a lower tax bracket for several years.
If they convert now, part of the conversion may be taxed at 22% or 24%. Waiting until retirement could allow them to convert smaller amounts at 12% or another lower marginal rate.
The difference becomes clear when comparing the tax on the same amount of income at different rates.
| Hypothetical tax rate | Tax on $50,000 | Money left after tax |
|---|---|---|
| 12% | $6,000 | $44,000 |
| 22% | $11,000 | $39,000 |
| 24% | $12,000 | $38,000 |
| 32% | $16,000 | $34,000 |
These simplified examples assume the entire $50,000 is taxed at the stated rate. Actual conversions can cross several brackets, and a complete comparison must also account for investment growth and the cost of using money to pay taxes early.
Still, the potential difference is meaningful. Paying 24% instead of 12% means $6,000 more in federal tax on a $50,000 conversion under these assumptions.
What makes this situation especially costly is timing. Some people convert during their highest earning years, even though retirement is only a few years away.
That is why the period between leaving work and starting Social Security can be especially useful for tax planning. Income may temporarily fall before pensions, Social Security, and required withdrawals increase it again.
Better approach: Estimate your taxable income for the next five to ten years. If a lower-income period is approaching, compare converting now against smaller conversions during those years.
2. A Roth Conversion Pushes You Into Higher Medicare Premiums
Many retirees understand that Roth conversions create income taxes. Fewer realize that the same conversion can also increase Medicare costs two years later.
Medicare uses something called IRMAA, short for Income-Related Monthly Adjustment Amount. It adds surcharges to Medicare Part B and Part D for people whose income crosses certain thresholds.
The unusual part is that Medicare generally looks at your income tax return from two years earlier. A conversion completed in 2026 could therefore affect your Medicare premiums in 2028, under the thresholds in effect then.
For 2026, the standard Medicare Part B premium is $202.90 per month. Higher-income beneficiaries may pay substantially more, according to the Centers for Medicare & Medicaid Services. CMS
Here are the published 2026 IRMAA figures for people filing joint tax returns.
| 2026 joint MAGI threshold | Monthly Part B per person | Extra monthly Part D per person |
|---|---|---|
| $218,000 or less | $202.90 | $0 |
| Above $218,000 to $274,000 | $284.10 | $14.50 |
| Above $274,000 to $342,000 | $405.80 | $37.50 |
| Above $342,000 to $410,000 | $527.50 | $60.40 |
| Above $410,000 to below $750,000 | $649.20 | $83.30 |
These thresholds apply to 2026 Medicare premiums, generally based on 2024 income. The Part D amounts are surcharges added to the person’s actual drug plan premium.
Now consider a hypothetical retired couple whose 2024 modified adjusted gross income, or MAGI, would have been $215,000 without a conversion. That amount would have remained below the first 2026 IRMAA threshold.
Suppose they converted an additional $20,000 in 2024, raising their MAGI to $235,000. Both spouses could move into the first IRMAA surcharge tier for 2026.
Each person would pay an additional $81.20 monthly for Part B and $14.50 for Part D, assuming both have the relevant coverage.
For two people, that adds approximately $2,297 in Medicare surcharges over one year, beyond the income tax paid on the conversion.
That is a substantial cost for a relatively modest conversion. The couple might eventually recover it through lower retirement taxes, but the Medicare expense belongs in the calculation.
For people retiring before Medicare eligibility, the timing matters as well. A conversion at age 63 or 64 can affect Medicare premiums after age 65 because of the two-year income lookback.
Certain life-changing events, such as retirement or a reduction in work hours, may qualify for an IRMAA adjustment request through Social Security. A Roth conversion by itself generally does not qualify for relief.
Better approach: Estimate the Medicare impact before choosing a conversion amount. Rather than converting $100,000 in one year, spreading smaller conversions across several years may help avoid some surcharge tiers.
3. More of Your Social Security Becomes Taxable
A Roth conversion can create a second tax problem for retirees who are already collecting Social Security. The conversion itself is taxable, but it can also cause more Social Security benefits to become taxable.
This is sometimes called the Social Security tax torpedo. It happens because Social Security taxation depends partly on your income from other sources.
The IRS uses a calculation commonly called combined income. It generally includes your adjusted gross income, tax-exempt interest, and half of your Social Security benefits.
For a single filer, combined income above $25,000 can make benefits taxable. For married couples filing jointly, that first threshold is $32,000.
Higher thresholds of $34,000 for individuals and $44,000 for joint filers can result in up to 85% of benefits being included in taxable income. SSA+1
That does not mean Social Security is taxed at an 85% rate. It means as much as 85% of the benefits can be included in income when calculating federal taxes.
Consider a simplified hypothetical example involving a single retiree receiving $24,000 annually in Social Security.
Assume the retiree has $23,000 in other income, no tax-exempt interest, and is considering converting another $10,000.
| Financial measure | No conversion | With $10,000 conversion |
|---|---|---|
| Annual Social Security | $24,000 | $24,000 |
| Other income, including conversion | $23,000 | $33,000 |
| Combined income | $35,000 | $45,000 |
| Taxable Social Security | $5,350 | $13,850 |
Under the standard Social Security taxation formula, the conversion raises taxable Social Security by $8,500. That means the $10,000 conversion produces an $18,500 increase in income included in the tax calculation.
The final tax bill still depends on deductions and applicable tax brackets. But the example shows why looking at the conversion amount alone can understate its effect.
The additional senior deduction introduced in 2025 did not eliminate federal taxes on Social Security benefits. The underlying Social Security taxation rules remain in place.
A retiree who has already reached the maximum 85% inclusion rate may not face this additional Social Security phase-in effect. That distinction makes individual calculations important.
Better approach: Calculate the taxable portion of your Social Security both with and without the proposed conversion. If the conversion causes a large increase, consider delaying it or reducing its size.
4. You Have to Use Retirement Savings to Pay the Tax Bill
A Roth conversion may create long-term tax advantages, but the IRS does not allow you to postpone the conversion tax until retirement. The taxable amount is generally included in income for the conversion year.
That means you need a practical plan for paying the bill. Without one, converting can leave you with less retirement money and a weaker cash reserve.
Consider Carlos, a hypothetical 58-year-old with $300,000 in a traditional IRA and $20,000 in savings. He wants to convert $150,000 because he expects tax rates to rise later.
Suppose his estimated combined federal and state income tax on the conversion is $36,000. The exact amount would depend on his income, filing status, deductions, and state.
Carlos does not have enough money outside his IRA to cover that tax. He decides to withhold $36,000 from the traditional IRA distribution and place the remaining $114,000 in the Roth.
The problem is that the $36,000 withheld for taxes does not become part of the Roth. He has immediately reduced the amount that can potentially grow tax-free.
Because Carlos is under age 59Ā½, the amount withheld and not converted could also be subject to the 10% additional tax on early distributions, unless an exception applies. The converted amount itself generally avoids that penalty when properly converted. Internal Revenue Service
There is another problem that can matter even more than the tax calculation. Carlos now has less retirement capital and may still need money for home repairs, healthcare, or unexpected family expenses.
Using outside cash to pay conversion taxes is often more attractive, but it is not automatically the right choice either. Selling investments may generate capital gains, and draining an emergency fund can create financial stress.
People sometimes focus so heavily on reducing future taxes that they overlook the value of having accessible cash today. That flexibility can be especially useful during the first few years of retirement.
Better approach: Check whether you can pay the conversion tax without reducing your emergency savings below a comfortable level. If not, a smaller conversion or no conversion may be the better financial decision.
5. The Conversion Takes Away Valuable Deductions and Credits
One of the more surprising Roth conversion risks in 2026 involves deductions introduced or changed under the 2025 federal tax law. A conversion can raise income enough to reduce tax benefits you otherwise would have received.
This matters because your true conversion cost is not always equal to your stated marginal income tax rate. Lost deductions and credits can increase the effective tax rate on the converted dollars.
For tax years 2025 through 2028, eligible taxpayers age 65 or older can claim an additional deduction of up to $6,000 per person. A married couple with two qualifying spouses could receive up to $12,000.
However, the deduction begins to phase out when modified adjusted gross income exceeds $75,000 for individual filers or $150,000 for married couples filing jointly. Internal Revenue Service
Imagine a hypothetical married couple, both 68, with modified adjusted gross income of $145,000 before any conversion. They are considering moving $50,000 from a traditional IRA into a Roth IRA.
That conversion would increase their MAGI to approximately $195,000, assuming no other changes. They would move into the income range where the additional senior deduction is reduced.
They would pay ordinary income tax on the taxable conversion and potentially lose part of a deduction they otherwise could have claimed. Their effective tax cost could therefore exceed what their ordinary tax bracket suggests.
The state and local tax deduction creates another potential problem for high-income households. Under the 2026 rules, the general SALT deduction cap is $40,400, with a phaseout beginning above $505,000 of modified adjusted gross income for most filers.
That phaseout can cause a conversion to increase taxable income by more than the amount actually converted. Fidelity published a January 2026 example based on 2025 tax rules in which a $100,000 conversion increased taxable income by $130,000 because of a lost SALT deduction.
In that hypothetical case, the additional federal income tax was about $42,468. That represented an effective tax rate of roughly 42.5% on the $100,000 conversion, despite the couple initially targeting a 32% bracket. Fidelity Investments+1
The figures from that example should not be automatically applied to a 2026 conversion. The relevant deduction limits and income thresholds must be recalculated for the actual tax year.
There is also an important concern for early retirees who purchase health insurance through the Affordable Care Act Marketplace. A Roth conversion increases household income used to assess premium tax credit eligibility and can reduce or eliminate available assistance.
For 2026, Marketplace premium tax credit eligibility generally has an upper income limit of 400% of the applicable federal poverty level. A conversion that pushes household income above the applicable limit can be particularly expensive.
Better approach: Calculate the full federal and state tax cost, including lost deductions and credits. A tax projection should show the difference between your liability with no conversion and your liability with the proposed conversion, not simply multiply the conversion by your marginal tax rate.
6. You Plan to Give Much of Your IRA to Charity
For some retirees, the best reason to avoid a Roth conversion has nothing to do with Medicare or future tax brackets. It comes down to what they intend to do with their retirement savings.
A traditional IRA can be particularly useful for charitable giving. Converting money that is eventually going to a qualified charity may create an unnecessary income tax bill.
People age 70Ā½ or older can generally make qualified charitable distributions, or QCDs, directly from eligible IRAs to qualifying charities. When properly completed, the distribution can be excluded from taxable income.
A QCD can also satisfy part or all of a traditional IRA’s required minimum distribution for the year. This is useful because it can reduce adjusted gross income rather than simply creating an itemized charitable deduction.
Consider Harold and Betty, a hypothetical couple in their mid-70s. They have a combined $800,000 in traditional IRAs, along with Social Security and pension income that cover most of their living expenses.
They regularly donate $15,000 annually to qualified charities. They also intend to leave a substantial portion of their remaining retirement savings to charitable organizations.
Converting hundreds of thousands of dollars from their traditional IRAs could create a substantial tax bill today. Yet some of that money might otherwise have been distributed through tax-free QCDs or passed directly to eligible tax-exempt charitable beneficiaries.
In many cases, a qualified charity receiving traditional IRA assets does not owe federal income tax on those assets. Harold and Betty could therefore be paying taxes on money that would not have been taxed in the charity’s hands.
This does not mean that charitable retirees should never convert. A partial conversion may still serve their personal spending needs or provide more flexibility for a surviving spouse.
The important distinction is between money they expect to spend personally and money they expect to donate. Those two portions of the same retirement account can have very different tax outcomes.
Better approach: Identify how much of your traditional IRA is likely to support charitable giving. Keep QCD eligibility, required minimum distributions, and charitable beneficiaries in mind before deciding to convert those assets.
7. Your Required Minimum Distributions Are Already Manageable
Avoiding future required minimum distributions is one of the most popular reasons for Roth conversions. But that benefit may be less valuable if your traditional retirement accounts are not large enough to create a serious tax problem.
Required minimum distributions, or RMDs, are amounts the IRS generally requires people to withdraw annually from certain tax-deferred retirement accounts once they reach the applicable age.
Under current law, the starting age is generally 73 for people born from 1951 through 1959 and 75 for people born in 1960 or later. The exact rules can also depend on account type and employment status.
Roth IRAs do not require lifetime RMDs for their original owners. Traditional IRA withdrawals, including RMDs, generally enter the owner’s taxable income except for any applicable nontaxable portion.
However, a required withdrawal is not automatically a financial burden. It may simply provide income that the retiree was planning to withdraw and spend anyway.
The size of an RMD depends on the account balance and an IRS life expectancy factor. For example, the standard Uniform Lifetime Table uses a factor of 26.5 at age 73.
The following table assumes a person age 73, subject to RMDs, using that factor and the stated traditional IRA balance from the preceding December 31.
| Traditional IRA balance | Age 73 RMD | Approx. monthly equivalent |
|---|---|---|
| $250,000 | $9,434 | $786 |
| $500,000 | $18,868 | $1,572 |
| $750,000 | $28,302 | $2,359 |
| $1,000,000 | $37,736 | $3,145 |
These are illustrations rather than forecasts. Actual future balances, investment returns, life expectancy factors, and distribution requirements will change the calculation. Internal Revenue Service
Consider a hypothetical retiree with $300,000 in a traditional IRA and modest additional income. At age 73, a balance of $300,000 would produce an RMD of about $11,321 under the standard table.
If that retiree already needs $12,000 annually from the account to cover living expenses, the RMD would not require much additional withdrawal beyond what was planned. It might not materially change the person’s tax situation.
Contrast that with someone who has $2 million in traditional IRAs, a substantial pension, and Social Security income that already covers all expenses. That person’s future RMDs may create much greater pressure on taxable income.
The larger balance could increase the risk of higher tax brackets, Medicare surcharges, and reduced deductions. Roth conversions may provide more value in that situation.
Better approach: Estimate your first RMD and several later RMDs using projected balances. If those withdrawals fit comfortably within your expected income and tax brackets, a major conversion may offer limited benefit.
8. Your Heirs May Pay Less Tax Than You Would Today
Roth conversions are often promoted as an estate planning strategy because inherited Roth IRAs can provide tax-free distributions when the applicable requirements are met. That can be an excellent benefit for families whose beneficiaries face high income tax rates.
However, converting traditional IRA money at a high tax rate today may be less attractive if the people inheriting it are likely to pay lower rates.
Imagine a hypothetical retired couple who would face a 32% marginal federal income tax rate on a substantial Roth conversion. They intend to leave most of their IRA to an adult child who currently falls in the 12% bracket.
Suppose the couple considers converting $100,000 that otherwise would eventually be inherited.
Under a simplified comparison, paying 32% today would mean $32,000 in federal income taxes on that conversion. If the child could instead withdraw the same $100,000 of taxable inherited IRA money at an overall 12% tax rate, the tax would be $12,000.
That represents a hypothetical $20,000 difference before considering investment growth, the timing of withdrawals, taxes on money used to fund the conversion, and other financial factors.
Of course, the child might not remain in the 12% bracket. Receiving an inherited traditional IRA could also increase their taxable income and move some withdrawals into higher brackets.
Many non-spouse beneficiaries must empty inherited IRAs within ten years, and some inherited traditional IRAs require distributions during that period as well. These rules can concentrate income into a relatively short time.
A beneficiary who earns $150,000 annually may therefore face a very different outcome from a beneficiary who earns $35,000. The size of the inherited account and the timing of withdrawals matter as much as the beneficiary’s current bracket.
There is also the question of the surviving spouse. A widow or widower may eventually face higher tax rates when filing as a single taxpayer, even if household income falls after one spouse dies.
For some couples, partial Roth conversions help reduce that future tax risk. For others, the expected tax cost is modest enough that converting aggressively provides little additional value.
Better approach: Compare projected lifetime taxes for the original IRA owner, the surviving spouse, and the intended beneficiaries. Avoid converting solely because a Roth inheritance sounds more attractive.
What to Do Instead of Making One Large Roth Conversion
Recognizing a potential problem does not mean avoiding Roth conversions forever. Sometimes the better strategy is to convert less money, choose a different year, or preserve a mix of traditional and Roth retirement assets.
The most useful decision starts with a complete financial comparison. Before converting, consider the income tax, Medicare, Social Security, deductions, cash needs, and future withdrawal effects together.
| Priority | What to check | Possible next step |
|---|---|---|
| 1 | Current versus future tax rates | Consider a lower-income conversion year |
| 2 | Medicare IRMAA thresholds | Reduce or spread conversions |
| 3 | Social Security taxation | Calculate combined income first |
| 4 | Cash available for taxes | Protect emergency savings |
| 5 | Deductions and healthcare credits | Model the full tax impact |
| 6 | Charitable giving plans | Preserve assets for future QCDs |
| 7 | Future traditional IRA RMDs | Project actual withdrawal needs |
| 8 | Spouse and beneficiary taxes | Compare family-wide tax outcomes |
A partial conversion can sometimes capture much of the benefit without creating the same immediate cost. For example, converting $20,000 annually over several carefully selected years may be more effective than moving $100,000 in a single year.
However, smaller annual conversions are not automatically superior. Repeated Medicare surcharges, higher taxes over several years, or changes in investment returns can alter the calculation.
There are also important rules for anyone already taking RMDs. An amount required to be withdrawn as an RMD cannot itself be converted into a Roth IRA, so the required distribution must be handled before converting additional eligible funds.
Roth conversions generally cannot be reversed through recharacterization under current law. That makes reviewing the tax impact before completing the transaction especially important.
The comparison should ultimately answer one question: Will paying taxes today improve your financial position enough to justify the immediate cost?
If the projected savings are small, uncertain, or dependent on optimistic assumptions, doing nothing may be a reasonable option. Keeping traditional retirement money is not a financial mistake simply because another account offers tax-free withdrawals.
