Should You Convert Your IRA Before Year-End? Nine Questions to Answer First
You have money in a traditional IRA, retirement is approaching, and another December is almost here. Should you pay taxes now to move some of that money into a Roth IRA?
Consider Tom and Linda, a fictional couple from outside Beatrice who do not represent any actual client. Both retired this year. They plan to wait before claiming Social Security, and required withdrawals from their traditional IRA are still several years away. Their taxable income is the lowest it has been in decades.
They have heard this could be a good window for a year-end Roth conversion. Maybe it is. But how large would the tax bill be, and how much should they convert? Could it raise Medicare premiums or make more of their Social Security taxable? And what happens to the survivor’s taxes when one of them dies?
Those are the right questions. A Roth conversion is not simply a choice between paying taxes now or later. The amount you convert can touch several parts of a retirement plan at once, so the decision works best when it is based on a coordinated, multiyear analysis.
What a Roth Conversion Actually Does
A traditional IRA is usually funded with pretax dollars, either from deductible contributions or from a rollover, such as moving money from an employer retirement plan after leaving a job. Withdrawals of untaxed money are generally taxed as ordinary income. A Roth IRA works the other way around: money goes in after tax, and qualified withdrawals, including earnings, are generally tax-free.
A Roth conversion moves money from a traditional IRA or another eligible pretax account into a Roth IRA. The taxable portion is generally added to your ordinary income for that year and reported on the applicable IRS form. If you have made nondeductible contributions, part of the conversion may be tax-free. However, the IRS generally looks at all of your traditional, SEP, and SIMPLE IRAs together to figure that share, so you usually cannot convert only the after-tax dollars.
| Traditional IRA | Roth IRA |
|---|---|
| Contributions may have produced a tax deduction, depending on income and workplace-plan coverage. | Contributions do not produce a federal tax deduction. |
| Withdrawals of untaxed money are generally taxable as ordinary income. | Qualified withdrawals are generally tax-free; nonqualified withdrawals of earnings may be taxed and penalized. |
| The original owner is generally subject to required minimum distributions. | The original owner has no lifetime required minimum distributions under current federal law. |
| Taxes are generally deferred until withdrawal. | Taxes are generally paid before money enters the account. |
Sources: IRS guidance on traditional and Roth IRAs.
A conversion is also different from a contribution. A Roth contribution is new money, subject to annual limits and income phaseouts. A conversion moves money you have already saved and generally is not subject to those income limits. Confirm current contribution limits and eligibility rules with the IRS or a tax professional.
There is no universal “right” amount to convert. Keep one idea in mind as you read: A Roth conversion moves the tax bill. It does not make the tax bill disappear.
Why a Roth Conversion Before Year-End Gets Attention
By December, most households can see their income, realized gains and losses, charitable gifts, deductions, and any required distributions already taken. That makes a conversion’s effect on the current year’s return easier to estimate.
The calendar matters. A conversion counts for the year the money leaves the traditional IRA, so it generally must be completed by the end of that tax year, with no extension to the filing deadline. Many custodians also set earlier internal cutoffs. Conversions generally cannot be undone through recharacterization. A deadline is a reason to start the analysis, not a reason to convert.
Questions to Answer Before a Year-End Roth Conversion
What Is Your Marginal Tax Rate Today?
Your marginal rate is the rate on your next dollar of income. Crossing into a higher bracket only raises the rate on the dollars above that line, not on all your income. A conversion stacks on top of everything else you earn during the year. Review the current brackets, standard deduction, and any age-related deductions before acting.
Your marginal rate is the rate on your next dollar of income. Crossing into a higher bracket only raises the rate on the dollars above that line, not on all your income. For 2026, joint filers pay 12% on taxable income from $24,800 to $100,800 and 22% from $100,800 to $211,400 (IRS). The 2026 standard deduction is $32,200 for joint filers, plus $1,650 for each spouse 65 or older (Rev. Proc. 2025-32). A conversion stacks on top of everything else you earn this year.
What Tax Rate Might Apply When You Withdraw the Money?
The real comparison is the rate on these dollars today versus the rate if you withdraw them later. That depends on future required distributions, Social Security, filing status, and tax law. Nobody can predict it reliably, but you can test a reasonable range of outcomes with your tax professional.
How Much Should You Convert?
A partial Roth conversion moves part of the balance, and many households spread conversions over several years. “Filling up” a bracket is a useful starting point, not an automatic answer. Conversion income can also affect capital-gains taxes, Social Security taxation, credits, deductions, and Medicare premiums. For example, people 65 and older may claim an extra deduction of up to $6,000 each for 2025 through 2028, but it phases out once modified adjusted gross income passes $150,000 on a joint return (IRS).
How Will You Pay the Tax?
Paying from cash or taxable savings keeps the full converted amount in the Roth. Withholding from the conversion leaves less in the Roth and may create additional consequences for people below the applicable retirement-distribution age. Neither method is right for everyone.
Could the Conversion Affect Medicare Premiums?
Medicare adds an income-related monthly adjustment amount, or IRMAA, to Part B and Part D premiums for higher-income beneficiaries. It’s a premium surcharge, not a tax. Medicare generally looks back two years, so a 2026 conversion could affect 2028 premiums.
For 2026, the standard Part B premium is $202.90 a month. Surcharges begin above $109,000 of modified adjusted gross income for individuals and $218,000 for joint filers, where Part B rises to $284.10 a month and Part D adds $14.50. Higher tiers step up to $689.90 a month for Part B and $91.00 for Part D at the top (CMS). For a couple both on Medicare, one dollar into the first tier could add about $2,297 a year. The 2028 thresholds haven’t been published.
Certain life-changing events, such as work stoppage or a spouse’s death, can support a reconsideration request (SSA). A voluntary Roth conversion generally isn’t one of them.
Could More of Your Social Security Become Taxable?
Medicare adds an income-related monthly adjustment amount, or IRMAA, to Part B and Part D premiums for higher-income beneficiaries. It’s a premium surcharge, not a tax. Medicare generally looks back two years, so a 2026 conversion could affect 2028 premiums.
For 2026, the standard Part B premium is $202.90 a month. Surcharges begin above $109,000 of modified adjusted gross income for individuals and $218,000 for joint filers, where Part B rises to $284.10 a month and Part D adds $14.50. Higher tiers step up to $689.90 a month for Part B and $91.00 for Part D at the top (CMS). For a couple both on Medicare, one dollar into the first tier could add about $2,297 a year. The 2028 thresholds haven’t been published.
Certain life-changing events, such as work stoppage or a spouse’s death, can support a reconsideration request (SSA). A voluntary Roth conversion generally isn’t one of them.
Are You Already Required to Take an RMD?
An RMD can’t be converted, and in an RMD year the first dollars out of the IRA count toward the requirement (IRS Publication 590-A). So you generally must take the full RMD before converting more. RMDs generally begin at 73 for people born from 1951 through 1959 and at 75 for those born in 1960 or later (IRS). Our guide to Social Security, Medicare and RMD ages shows how these milestones fit together. Roth IRA owners have no lifetime RMDs under current law.
How Could the Decision Affect a Surviving Spouse or Other Heirs?
After one spouse dies, the survivor generally files as a single taxpayer, with narrower brackets, yet may keep much of the same IRA and pension income. Some planners call this the survivor’s tax squeeze, and converting while both spouses are living may ease it for some households.
Heirs may value a Roth because qualified distributions are generally tax-free, but many non-spouse beneficiaries must still empty an inherited IRA within the applicable distribution period. If your adult children will help carry out your plan, it helps to talk with them about it now.
How Long Will the Converted Money Remain Invested?
Paying tax now buys potential tax-free growth, which generally has more room to work the longer the money stays invested. Separate holding-period rules also apply. Earnings may be tax-free only after the applicable holding period and once you meet an applicable qualifying condition. In addition, taxable converted amounts withdrawn too soon may trigger an additional tax for people below the applicable age.
Review these often-misunderstood rules with a tax professional before counting on converted money soon.
A Hypothetical Nebraska Household
This example is hypothetical and for education only. Tom and Linda are fictional, the figures are simplified, and the results are not a recommendation, projection, or prediction.
Assumptions: Tom and Linda are both retired, enrolled in Medicare, and not yet claiming Social Security. They file jointly, use the standard deduction, and may qualify for an age-related deduction. Their other income includes pension and interest income. They have cash outside the IRA to pay any tax and have no RMD due. This illustration considers federal income tax only; Nebraska tax and other factors are excluded.
| Scenario | Conversion Approach | Possible Advantages | Possible Tradeoffs |
|---|---|---|---|
| No conversion | Convert no amount. | No conversion tax in the current year. | About $22,500 of deductions go unused; the IRA keeps growing toward larger future RMDs |
| Partial conversion | Convert $75,000. Taxable income $52,500; estimated federal tax $5,804 (top bracket 12%) | Uses deductions and low-bracket room that would otherwise go unused; adds tax diversification | Creates a current tax bill; much of the IRA may remain pretax. |
| Larger conversion | Convert $200,000. Taxable income $186,500 after a partly phased-out senior deduction; estimated federal tax $30,454 (top bracket 22%) | Moves much more money into the Roth while staying below the 24% bracket | Income of $225,000 exceeds the 2026 IRMAA threshold of $218,000, so 2028 premiums could rise; the deduction phase-out raises the effective rate on the top dollars |
The table does not name a winner, because the answer depends on facts a short illustration cannot capture: life expectancy, Social Security timing, long-term care, legacy goals, and how long one spouse might file alone. If you were in Tom and Linda’s shoes, which of those unknowns would worry you most?
When a Conversion May Be Less Attractive
None of these automatically rules out a conversion, but each deserves a hard look. A conversion may be less appealing if you expect a meaningfully lower tax rate later, would have to pay the tax from the IRA itself, or may need the money soon. It may also cost more than it seems if it pushes you into a higher IRMAA tier, makes more Social Security taxable, or reduces a credit or deduction you are counting on.
Future plans matter too. If you intend to give through qualified charitable distributions after reaching the applicable age, plan to move to a lower-tax state, or expect large future deductions such as long-term care costs, leaving some money pretax may make sense. So may a lack of cash for estimated taxes.
Nebraska Tax Considerations
Nebraska’s income tax starts from federal adjusted gross income, so the taxable portion of a conversion generally flows onto your Nebraska return, just like taxable IRA withdrawals. Qualified Roth distributions generally aren’t in federal adjusted gross income, so Nebraska generally doesn’t tax them either.
Since tax year 2024, Nebraska has fully excluded Social Security benefits from state income tax. The state’s top individual rate is scheduled to fall to 4.55% for 2026 and 3.99% for 2027 under LB 754 (Nebraska Department of Revenue), so a dollar converted in 2027 may face a slightly lower state rate, all else equal. Confirm current rates before acting, since schedules can change. If you’re moving into or out of Nebraska, timing matters even more, because conversion income is generally taxed by the state where you live when you convert.
Year-End Roth Conversion Checklist
Bring this list to your next planning meeting.
- Estimate total income for the year.
- Review current federal and Nebraska tax brackets.
- Confirm remaining deductions.
- Review realized capital gains and losses.
- Confirm whether an RMD is required, and take it first.
- Estimate the effect on Social Security taxation.
- Review Medicare IRMAA thresholds and the applicable lookback period.
- Decide how the resulting tax would be paid.
- Review cash reserves.
- Consider a surviving spouse’s future tax position.
- Review charitable-giving plans, including QCDs.
- Confirm your custodian’s processing deadline.
- Coordinate with your tax professional.
- Confirm the final amount before authorizing the conversion.
- Keep conversion confirmations and applicable tax records.
FAQ
What Is the Deadline for Completing a Roth Conversion?
To count for a particular tax year, the conversion generally must be completed by the end of that year. There is no extension to the tax-filing deadline, and many custodians set earlier internal cutoffs, so check with yours well before the holidays.
Is There an Income Limit for Roth Conversions?
No. The income limits that restrict direct Roth IRA contributions generally do not apply to conversions. The taxable amount you convert is still added to your income for the year.
Can a Roth Conversion Increase Medicare Premiums?
It can. Medicare’s income-related surcharges generally use your modified adjusted gross income from an earlier period, so a conversion could raise Part B and Part D premiums if it pushes income above the applicable thresholds.
Can I Convert an IRA After Beginning RMDs?
Yes, but the RMD itself cannot be converted. In a year you are subject to an RMD, you generally must take the full required amount first and then convert additional eligible money.
Can I Reverse a Roth Conversion if I Change My Mind?
No. Roth conversions generally cannot be recharacterized back to a traditional IRA. That is why it is worth confirming the amount carefully before you authorize it.
The Better Question to Ask
A year-end Roth conversion can be worth evaluating, especially in the lower-income years between retirement and Social Security or RMDs. But the calendar alone should not decide it. Your tax bracket, Medicare premiums later on, Social Security taxation, and a surviving spouse’s future taxes are all connected.
The better question is not simply, “Should I convert?” It is, “How would converting this amount, in this year, affect the rest of my financial plan?”
If you would like help thinking that through, Garnett Investment Strategies is glad to talk. As an independent fiduciary Registered Investment Advisor in Beatrice, we help families across southeastern Nebraska coordinate retirement planning, Roth conversion analysis, Social Security, Medicare, and portfolio withdrawals alongside your tax professional. There is no pressure and no obligation. Reach out, bring the checklist above, and we can look at your circumstances together.