Timing a Roth IRA Conversion to Manage Taxes

A Roth IRA can be a powerful tool for minimizing taxes in retirement. Although contributions are made with after-tax dollars, the assets can grow tax-free, and withdrawals in retirement are tax-free so long as you're 59½ or older and the account has been open for at least five years.

However, there are income limitations. In 2026, your modified adjusted gross income must be less than $153,000 for single filers and less than $242,000 for married couples filing jointly to make a full contribution to such accounts.

That's why many high earners choose to convert some of their traditional 401(k) or IRA funds to a Roth IRA, even though any amount converted is subject to ordinary income tax rates in the year of the conversion. But is it better to convert the entire amount all at once or to spread out conversions over multiple years?

"The argument for a lump-sum conversion is that, even though you pay taxes on the full amount in a single tax year, you're giving the assets more time to grow tax-free," says Hayden Adams, CPA, CFP^®, director of tax planning and wealth management research at the Schwab Center for Financial Research. "However, if the lump-sum conversion bumps you into a higher income tax bracket, it could take years of growth to make up for the extra tax hit—assuming you ever make up that lost ground."

Instead, investors might want to parcel out their conversions using an approach called tax bracket management. "Essentially, you're trying to use up your current tax bracket without edging into a higher one," Hayden says. It works like this:

1. Toward the end of the year, calculate your taxable income, then subtract that amount from the upper limit of your tax bracket.
2. The remaining dollar amount is how much you could convert this year while remaining in the same bracket.
3. In subsequent years, you can repeat this process as needed, keeping in mind that your account's value could always decline due to market fluctuations or losses.

For example, if your taxable income as a joint married filer in 2026 is $650,000, you'd subtract that from the upper limit of the 35% tax bracket ($768,700) to determine how much you can convert without tipping into the next tax bracket ($768,700 – $650,000 = $118,700).

"There is one case, however, where a lump-sum conversion could be a smart move," Hayden says. "If you're in the highest tax bracket and likely to remain there for the rest of your life, converting a large amount to a Roth in a single tax year could make sense." In fact, the sooner you do the conversion, the more time that money will have to potentially benefit from market growth.

Conversely, it may not make sense to perform a Roth conversion if you expect to be in a lower tax bracket in retirement than you are today—or you don't have the means to pay the taxes on the conversion without tapping emergency funds or other investments.

"When in doubt, work with your financial advisor to determine whether a Roth conversion makes sense for you and, crucially, when to do it," Hayden says.