Dave Ramsey spent time on his show walking a caller through one of the most overlooked moves in retirement tax planning: converting a traditional IRA to a Roth in small annual slices instead of one giant taxable event. The difference between doing this well and doing it carelessly can run into six figures of lifetime tax savings.
Here is what Ramsey said, verbatim:
“It’s tempting to move the money that you have in traditional gradually to Roth to keep you from having bracket creep… you could run those numbers out… you could run like bump a couple of brackets but not go all the way to 40, not go all the way to 39. Right. That’s one way of doing it. And do a little bit a year and kind of dribble it out.”
The verdict: Ramsey is right, and the math is brutal if you ignore him
Dribbling beats dumping, and the reason is built into the tax code itself. Because the U.S. income tax system is progressive, every additional dollar of conversion income stacks on top of your existing income and gets taxed at the next rate up. Convert a $1.2 million IRA in a single year and you pay top marginal rates on most of it. Convert $100,000 a year for twelve years and you stay in the cheaper brackets the whole time, year after year.
The bracket structure is what does the damage. For 2026, married filing jointly under the One Big Beautiful Bill Act, the 12% bracket runs to $100,800, the 22% bracket to $211,400, the 24% bracket to $403,550, the 32% bracket to $512,450, and 35% kicks in above that up to $768,700, where 37% begins. The standard deduction for MFJ filers is $32,200. Retirees 65 and older also qualify for a new temporary $6,000 additional deduction under the OBBBA, available through 2028 for couples with modified adjusted gross income at or below $150,000. That extra cushion can push more of a conversion into the lower brackets.
A real scenario with real dollars
Take a couple, both 65, with $1.5 million in traditional IRAs. For context, that is roughly five times the average baby boomer IRA balance of $286,700, according to Fidelity’s analysis of 19.6 million IRA accounts as of Q1 2026. It is a realistic target for a diligent, above-average saver. They draw $80,000 a year combined from Social Security and a small pension. After the standard deduction and the senior deduction, taxable income sits near $42,000, comfortably inside the 12% bracket.
Option one: the dump. Convert the whole $1.5 million in one year. Stacked on top of existing income, that conversion blows through the 22%, 24%, 32%, and 35% brackets and parks the top slice at 37%. Federal tax on the conversion alone lands around $475,000 to $500,000, plus state tax and a guaranteed IRMAA Medicare premium surcharge.
Option two: the dribble. Convert roughly $150,000 a year for ten years. Each year, the conversion fills the rest of the 12% bracket and most of the 22% bracket, with a small slice taxed at 24%. The blended federal rate on each year’s conversion lands around 18% to 20%. Over a decade, total federal tax on the same $1.5 million comes in around $290,000 to $310,000.
That is roughly $175,000 in federal tax saved. The Roth balance then grows tax-free for the rest of their lives, and their heirs get a ten-year inherited distribution window with no ordinary income tax owed on the gains.
The variable that flips the answer
The whole strategy hinges on one number: your marginal tax rate in your 70s versus today. If you expect to be in a lower bracket once required minimum distributions and Social Security stack up, conversions will cost you more than they save. If you expect a higher bracket, they are worth doing.
Required minimum distributions start at age 73. On a $1.5 million traditional balance that has compounded through your 60s, the first-year RMD lands near $60,000 and climbs from there. Add Social Security, a pension, and any portfolio income, and a couple sitting comfortably in the 12% bracket at 65 can easily find themselves in the 24% or 32% bracket at 75. That is the bracket creep Ramsey is warning about.
The broader trend suggests more retirees are waking up to this math. Fidelity’s Q1 2026 retirement analysis found that Roth conversion transactions rose 41% year over year, and 67% of all IRA contributions went to Roth accounts in the quarter, both record levels. Clearly, many savers have run the numbers and reached the same conclusion Ramsey laid out on his show.
Rates on the return side matter too. The 10-year Treasury yield stood at approximately 4.69% in mid-August 2026, up sharply from its level a year earlier as geopolitical pressures pushed long-end yields toward multi-year highs. The fed funds target range sits at 3.50% to 3.75%, with the Fed holding steady through multiple consecutive meetings. Every dollar moved to the Roth today compounds tax-free against that elevated yield backdrop, which only strengthens the long-run case for converting sooner rather than later.
What to do this week
- Pull last year’s tax return and identify your current marginal federal bracket. Note how much room you have before the next bracket kicks in.
- Project your RMD-era income. Estimate your traditional balance at 73, multiply by roughly 4% for the first RMD, and add Social Security and any pension.
- Pick a target ceiling. Ramsey’s framing of bumping a bracket or two without touching 32%, 35%, or 37% is the right instinct for most retirees.
- Watch the IRMAA cliffs. Medicare premium surcharges trigger at specific MAGI thresholds and can add thousands per year if a conversion pushes you over.
- Coordinate with Social Security timing. Conversions before claiming benefits avoid making more of those benefits taxable.
Ramsey’s word for it was dribble. Picture a steady faucet, open just wide enough to fill the cheap brackets each year without spilling into the expensive ones. That is the mechanism that keeps the IRS out of the top of your stack.
Editor’s note: The 10-year Treasury yield has been refreshed to approximately 4.69% as of mid-August 2026, up from the 4.63% figure cited in the previous version. New context has been added on Fidelity’s Q1 2026 finding that Roth conversion transactions rose 41% year over year, with 67% of all IRA contributions flowing to Roth accounts.
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