The Roth conversion calendar nobody publishes

A Roth conversion is one of the most oversold ideas in financial planning, which is a shame, because it is also one of the most valuable when it's done with some restraint. The shorthand — pay tax now at a lower rate, grow tax-free forever — is broadly true and almost entirely useless as an action plan. The useful question is always the same: what month, what bracket, what year.

A conversion moves money from a pre-tax IRA or 401(k) into a Roth IRA. Every dollar converted is ordinary income in the year of the conversion. You owe tax on it at whatever bracket the sum of your other income pushes you into. After that, the money grows tax-free, comes out tax-free in retirement, and — for now — carries no required minimum distribution during the original owner's life.

The math works when your marginal rate today is lower than your expected marginal rate in the year the money would otherwise come out. That sounds obvious. It is also the part most people get wrong, because they compare today's bracket to today's retirement bracket and forget that Congress has rewritten the tax code roughly every decade for seventy years.

The current federal brackets — the 22%, 24%, and 32% bands in particular — are set to revert in 2026 absent legislation, and the reversion pushes millions of households into the next tier up for the same income. A married couple with taxable income of $210,000 sits comfortably in the 24% bracket today. The same income in the reverted regime sits in the 28%. Four points on a $40,000 conversion is $1,600 per year of difference — small per conversion, significant across a five-year runway.

We think in windows, not in years. A typical planning window opens the year a client's earned income drops — an early retirement, a sale of a business, a sabbatical — and closes when Social Security or RMDs start pushing taxable income back up. Inside that window, every January we look at the whole year ahead and ask a cold question: how much room is there in the current bracket before the next one kicks in? That number, minus everything else we know will land in ordinary income, is the upper bound of the year's conversion.

December is where most of the damage happens. Clients read a Kiplinger piece over Thanksgiving, call us on December 18th, and want to convert "as much as possible before year-end." We usually say no, or at least, not yet. December conversions collide with every other year-end item — capital gains distributions from mutual funds, last-minute bonuses, charitable timing — and the bracket ceiling you thought you had at Thanksgiving is often gone by the 20th. A January conversion gives you eleven more months of information. The Roth doesn't care what month it was funded in.

A few quieter things most articles skip. The pro-rata rule will ruin a backdoor conversion if there is any pre-tax IRA money sitting in the same taxpayer's name — so a rollover from an old 401(k) the prior year can quietly raise the tax on a conversion this year. IRMAA, the Medicare premium surcharge, keys off modified adjusted gross income from two years earlier, so a 62-year-old's conversion today can raise her Medicare Part B premium at 64. And state tax matters, sometimes a lot. New Jersey, for instance, does not give a deduction for traditional IRA contributions the same way federal does, so the basis math on a conversion is genuinely different here than it would be in, say, Pennsylvania.

Every January in our office is the same. We pull the prior year's return, we pull the current year's projection, and we draw a line at the top of the current bracket. What fits under the line is the conversation. What doesn't fit waits. The years compound.

One last thing the calendar doesn't show: inherited IRAs no longer get the stretch treatment they once did. Under current rules, most non-spouse beneficiaries must empty an inherited IRA within ten years. That changes the math for clients who planned to pass a large pre-tax IRA to adult children — the children may face significant forced income in their peak earning years. Converting more of a large traditional IRA during the 59½-to-73 runway, even at a slightly higher bracket, can leave heirs with a Roth they empty tax-free over ten years instead of a traditional IRA that pushes them into the 32% bracket in their fifties. It's one more reason the conversion calendar isn't just about you.