Year-End Roth Conversions: What to Weigh Before December 31

Every fall, clients start asking whether this is the year to do a Roth conversion. The timing makes sense, since by October most people have a clear view of their income for the year, and that view is exactly what you need to judge whether moving money from a traditional IRA into a Roth IRA is worth the tax bill. Unlike an IRA contribution, which can often wait until the following April, a conversion only counts for 2026 if it is completed by December 31. In my experience, people who start this conversation in October make far better decisions than those who start the week after Christmas.

How a Roth Conversion Works

A Roth conversion moves money from a pre-tax account, usually a traditional IRA or a rolled-over 401(k), into a Roth IRA. The converted amount is added to your taxable income for the year, and in exchange, that money and its future growth can come out tax-free in retirement. Roth IRAs also have no required minimum distributions during the owner’s lifetime, which gives you more control over when you draw on them.

The trade works best when you convert in a year when your tax rate is lower than the rate you or your heirs would likely pay later. Keep a few rules in mind before you start. A conversion can no longer be undone, since the option to reverse one was eliminated in 2018. If you are under 59½, the taxable portion of each conversion has its own five-year waiting period, measured from January 1 of the year you convert, before it can be withdrawn without a 10% penalty. That is separate from the rule for earnings, which come out tax-free only once you are 59½ and your first Roth IRA has been open for at least five years.

Why the Math looks different in 2026

For years, much of the urgency around conversions came from the scheduled expiration of the 2017 tax brackets after 2025. That expiration never happened, because the One Big Beautiful Bill Act made the current seven brackets permanent, and the IRS adjusted them for inflation again for 2026.

With that deadline gone, the more useful question is whether your own tax rate is likely to rise. For many retirees it will, even with stable brackets, because required minimum distributions, Social Security, and eventually the loss of a spouse can push a household into a higher bracket in its 70s and 80s than it occupied in its early 60s.

Who Tends to Benefit Most

The best candidates usually have a gap between their tax rate today and the rate they expect to face later. The most common example is the stretch between retirement and the start of Social Security or RMDs, which begin at 73 for most current retirees and 75 for anyone born in 1960 or later. Those lower-income years can be the least expensive window you will ever have to move pre-tax dollars into a Roth.

Large pre-tax balances create similar pressure, since big RMDs alone can push you into a higher bracket later. Married couples should also plan for the surviving spouse, who generally files as a single taxpayer with about half the bracket room while household income stays roughly the same. Heirs matter too, because most non-spouse beneficiaries must empty an inherited IRA within 10 years, and while that rule applies to inherited Roth IRAs as well, the Roth withdrawals are generally tax-free.

Conversions are usually a weaker fit if you would have to pay the tax out of the IRA itself, if you expect a lower bracket later, or if you plan to leave the account to charity, which owes no income tax on pre-tax dollars.

How Much to Convert

The usual approach is to fill up your current bracket without spilling into the next one, but federal brackets are only one of several lines worth watching.

Medicare premiums are often the most important. Medicare adds a surcharge, known as IRMAA, once your modified adjusted gross income (MAGI) passes certain levels, and it looks back two years, so a 2026 conversion will affect the premiums you pay in 2028. The 2028 thresholds won’t be published until late 2027. Today’s thresholds, which set 2026 premiums using 2024 income, begin above $109,000 for single filers and $218,000 for joint filers, and while inflation will likely nudge them higher, planning against today’s figures with a cushion is the safer approach. The surcharge works like a cliff, where one dollar over a threshold raises premiums for the full year.

Brackets and IRMAA also measure income differently. Brackets apply after the standard deduction while IRMAA looks at income before it, so a couple who fills the 22% bracket to $211,400 of taxable income would have a MAGI of at least $243,600, well past the first tier. For anyone 63 or older, the IRMAA line is often the real ceiling.

The new senior deduction adds another layer. Through 2028, people 65 and older can deduct up to an extra $6,000, but it shrinks by 6% of each dollar of MAGI above $75,000 for single filers and $150,000 for joint filers, which nudges a 22% bracket closer to an effective 23.3% inside that range.

In Ohio, conversion income flows from your federal adjusted gross income into Ohio adjusted gross income with no state deduction to offset it, so it is generally taxed at the flat 2.75% rate that applies to income above $26,050. It can also cost you some smaller benefits. Ohio’s retirement income credit (up to $200), the $50 senior citizen credit, and the lump sum credits are only available when Ohio MAGI, less exemptions, is under $100,000, so a conversion that pushes a household over that line can eliminate them for the year. Ohio doesn’t tax Social Security, and municipal income taxes generally exclude retirement distributions, but school districts with a traditional income tax base will count conversion income while earned-income-base districts will not.

A Year-End Checklist

Making the Decision

Roth conversions reward steady, multi-year planning more than a single bold move. If you’d like to know whether a conversion makes sense for you this year, reach out to me or anyone on the Rockport team before Thanksgiving. That leaves time to build a projection, coordinate with your tax professional, and finish well ahead of December 31.

Information as of 10.20.26

This article is for informational purposes only and is not a recommendation of any investment or tax strategy. Rockport Wealth Advisors does not provide tax or legal advice; please consult your tax professional before completing a Roth conversion. Figures reflect 2026 thresholds and are subject to change.

Rockport Wealth Advisors is a DBA of Rockport Wealth, LLC, a fee-based Registered Investment Adviser (RIA) registered with the Securities and Exchange Commission and offering a full range of professional services. The scope of any financial planning and/or consulting services to be provided depends upon the needs of the client and the terms of the engagement. Please see our CRS & ADV disclosure documents for more information about our business.