Constance retired last year at 66 with a portfolio most planners would call enviable. She has $900,000 in a traditional IRA, $200,000 in a Roth, $200,000 in a taxable brokerage, and gets roughly $30,000 a year in Social Security. At age 67, she sits in the window between retirement and required minimum distributions, the years many advisors call the “Roth conversion runway.” So Constance took what seems like a reasonable step. She converted $400,000 from the IRA to the Roth in a single tax year to “get it over with.”
But that one decision cost her roughly $48,000 more than it needed to. Split across two calendar years, the same conversion would have produced the same long-term Roth balance with a meaningfully smaller tax and Medicare bill. This is one of the most common, and most expensive, mistakes retirees in the pre-RMD window make.
Why the Lump Conversion Backfires
A Roth conversion is taxed as ordinary income in the year you do it. Stack $400,000 of conversion income on top of Social Security and modest interest from the brokerage account, and you blow straight through multiple brackets.
For a single filer in 2025, the 24% bracket runs from $103,351 to $197,300, and the 32% bracket runs from $197,301 to $250,525, with 35% taking over above that. The 2026 thresholds are similar in shape: 24% kicks in over $105,700 and 32% over $201,775 for single filers. A $400,000 conversion does not just fill the 24% bracket. It pushes the top dollars into 32% and even 35% territory once Social Security and other income are layered in.
Investment strategist Wes Moss recently addressed this scenario on a Clark Howard Podcast episode. “Just be careful not to do too big of a conversion all at once because the conversion itself increases your income, which increases your tax bracket,” he said. “So typically the right way to do Roth conversions is in chunks spread out over time.”
The tax bill is only half the damage. Medicare uses a two-year lookback on modified adjusted gross income to set Part B and Part D premium surcharges, known as IRMAA. A 67-year-old converting in 2026 will see the IRMAA consequences hit her 2028 premiums.
IRMAA works as a hard cliff. Cross a tier by a single dollar and the surcharge applies to the entire year. For single filers, Tier 1 begins around $109,000 of MAGI, and the highest tier sits well above $400,000. Constance’s lump conversion vaulted her into Tier 4, where the monthly premium add-on is several hundred dollars. Spread across both Part B and Part D, a single year at the top tier can cost more than $4,000 above standard premiums.
The Two-year Ladder, in Numbers
Splitting the conversion into $200,000 in year one and $200,000 in year two keeps the top of each year’s income near the ceiling of the 24% bracket rather than punching into 32%. It also keeps MAGI in a lower IRMAA tier in both lookback years.
The roughly $48,000 delta comes from three sources: dollars that no longer get taxed at 32% or 35%, a lower IRMAA tier in each lookback year, and a smaller share of Social Security pushed into taxation at the higher provisional income level.
What to Evaluate Before You Convert
- Pick a target bracket ceiling. Most pre-RMD retirees should fill the 24% bracket and stop. For 2026, that ceiling for single filers is $201,775 of taxable income. Work backward from there to size the conversion.
- Model the IRMAA tiers before December. The conversion shows up on Medicare’s radar two years later. Run the MAGI number against the current single-filer tiers and leave a buffer. Crossing a tier by $500 costs the same as crossing it by $5,000.
- Account for the 2026 Social Security COLA. The 2.8% COLA nudges benefit income higher, which nudges MAGI higher before a single dollar is converted.
- Pay the conversion tax from the brokerage account. Using IRA dollars to cover the tax shrinks the amount actually moved into the Roth and defeats much of the strategy.
Roth conversions are almost always better in slices rather than in a single bite. Many retirees could benefit from a fee-only investment advisor or tax professional to guide them through the process. The fees can definitely be worth the taxes saved.
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