Why Roth Conversions Backfire for Most Retirees: The $12,000 Tax Bill Nobody Plans For

On the May 12 episode of The Clark Howard Podcast, financial advisor Wes Moss, CFP, told Clark Howard something most retirement content avoids saying out loud:

When the tax bill comes due 3 months later, 6 months later, a year later, people forget all the glory of Clark Howard talking about the Roth. And you know what they remember? $12,000 tax bill.

Wes Moss, The Clark Howard Podcast, 05.12.26

Howard, who runs one of personal finance’s most listened-to shows with more than one million monthly downloads, admitted his own bias in that same conversation: I might as well have been Senator Roth from Delaware. I’m so into the Roth. So then you get blinders on and you don’t see the downsides.

Roth conversions have been a fixture of retirement podcasts and YouTube planning channels for years, marketed as close to a no-brainer. But the math rarely supports the marketing. For any retiree weighing a conversion, the trade-off is straightforward: you write a five-figure check to the IRS this year in exchange for tax-free growth later. If your assumptions about future tax rates turn out to be wrong, you paid a premium for nothing.

The math behind the conversion

Federal tax brackets are marginal, a fact that gets glossed over in most conversion pitches. A married couple in the 24% bracket does not pay 24% on their entire income. Their first dollars are taxed at 10%, then 12%, then 22%, and only the top slice reaches 24%. Moss put the effective rate for a couple nominally in the 24% bracket at roughly 16% to 18%. The catch is that a Roth conversion gets stacked on top of all other income, so every converted dollar is taxed at the full marginal rate of 24%.

Consider the scenario Moss laid out. A retired couple converts $50,000 from a traditional IRA to fill the 24% bracket. The IRS treats that conversion as ordinary income, producing a bill of roughly $12,000 due with the following April’s return. That money has to come from somewhere. Pull it from the IRA itself and you shrink the asset you were trying to optimize. Pull it from a taxable brokerage account and you may trigger capital gains in the process of covering the conversion tax. Either way, real dollars leave your pocket today to avoid a hypothetical bill decades from now, at rates Congress has not written yet.

Moss summed up what he sees in practice: People hate the tax bill that comes with it, whether it makes financial sense or not. They hate it because they’re already paying taxes and they’re paying more taxes. He called this the real-life story 90% of the time. Since that May episode aired, Moss returned to the podcast on June 2, 2026, and walked listeners through a full Roth conversion decision tree, again making clear that the answer is rarely automatic.

The IRMAA trap

Howard flagged the piece that quietly wrecks budgets: the Income Related Monthly Adjustment Amount on Medicare premiums. Once Required Minimum Distributions kick in at age 73, or when a large Roth conversion spikes reported income, Medicare Part B and Part D premiums climb steeply. In 2026, the IRMAA surcharge activates once individual income exceeds $109,000, or $218,000 for married couples filing jointly. The standard Part B premium is $202.90 per month, but IRMAA can push that as high as $689.90. For 2026, surcharge amounts rose roughly 9% from the prior year, while the income thresholds increased only about 3%.

Moss noted the cruelest detail: You can’t exactly plan for IRMAA because they’re 2 years behind on what your income is going to be. You can only guess. IRMAA uses a two-year lookback, meaning a conversion completed in 2026 will hit Medicare premiums in 2028. A couple that crosses a bracket threshold by a single dollar can face more than $1,000 in additional annual premiums per person, for the full calendar year. The broader rate environment sharpens this pressure further. The 10-year Treasury yield surged above 5% in late September 2026 and reached approximately 5.28% in early October, a level last seen in 2007, reflecting persistent inflation, heavy government bond issuance, and mounting expectations of additional Federal Reserve tightening.

On the monetary policy side, the Fed held rates steady at 3.5% to 3.75% at its July 29, 2026 meeting by a 9-3 vote, with Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari, and Dallas’s Lorie Logan all dissenting in favor of an immediate hike. That dissent proved prescient: at its September 16, 2026 meeting, the FOMC voted unanimously to raise the federal funds rate by a quarter point to a range of 3.75% to 4%, the first rate increase since 2023. For fixed-income retirees already absorbing higher Medicare costs, both the rising yield environment and the resumed hiking cycle add real pressure to the Roth conversion calculus.

When conversions actually work

Conversions produce a net benefit only when your future tax rate will be meaningfully higher than today’s. The key variable is the gap between your current marginal bracket and your projected bracket once RMDs arrive.

A retiree in the 12% bracket now, facing RMDs that will push income into the 22% or 24% range later, has a genuine arbitrage opportunity. A partial conversion during those lower-bracket years can pencil out. The math looks very different for someone already in the 24% or 32% bracket whose RMDs will land in roughly the same territory. In that case, you are prepaying tax with no advantage. Factor in IRMAA, and the calculus can flip to negative: total lifetime taxes end up higher than if you had converted nothing.

The “tax-free growth” argument also assumes a return spread wide enough to justify the upfront cost. With the 10-year yield above 5%, the payback window extends further out for retirees holding significant fixed-income allocations. The opportunity cost of the conversion tax is higher when safe assets actually earn a meaningful return, and that math receives far less attention than it deserves in most conversion pitches.

What to do before you sign

1. Build all three buckets, not just Roth. Moss’s prescription is tax diversification: after-tax brokerage, traditional pre-tax, and Roth. Future you wants the flexibility to draw from whichever account makes the most sense in any given year, based on income at that time.
2. Run the marginal versus effective math. Pull last year’s 1040, find your effective rate, and compare it to the marginal rate any conversion would hit. That gap is the true cost of converting.
3. Model IRMAA two years forward. Use the current Medicare IRMAA brackets and project where a conversion would push your Modified Adjusted Gross Income two years out. The joint-filer IRMAA threshold in 2026 starts at $218,000.
4. Convert in small slices. If conversion still makes sense after the above analysis, fill the bottom of a bracket rather than the top. Stop before crossing into a higher bracket or triggering an IRMAA tier.

Howard’s enthusiasm for Roth is understandable, rooted in genuine benefits for workers contributing during lower-income working years. Converting six figures in your 60s is a different calculation. Every dollar of additional income can ripple through tax brackets, Medicare premiums, and the cost of capital simultaneously. Moss’s $12,000 example captures the gap between those two ideas. Most retirees discover that gap only after the check has already cleared.

Editor’s note: This pass updated the 10-year Treasury yield to approximately 5.28% based on early October 2026 market data, reflecting a surge above 5% to levels last seen in 2007. It also added the names of the three July 29 FOMC dissenters (Beth Hammack, Neel Kashkari, and Lorie Logan) and noted that the September 16, 2026 FOMC meeting resulted in a unanimous 25-basis-point rate hike to 3.75%-4%, the first increase since 2023, replacing the prior article’s forward-looking language about potential future hikes.

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