The Roth Conversion Trick That Could Save You More Than $50,000

If you’ve built up a large traditional IRA or 401(k) balance, a Roth conversion could be one of the smartest tax moves you make. By converting your money to a Roth IRA, you can enjoy tax-free gains in your account plus tax-free withdrawals.

Just as importantly, Roth IRAs do not force savers to take required minimum distributions (RMDs). And avoiding those could be your ticket to keeping your taxes manageable.

But there’s a Roth conversion mistake that could cost you tens of thousands of dollars — converting too much in a single year.

The smarter way to do a Roth conversion

Many people assume they should try to do a Roth conversion as quickly as possible. While that strategy gets the taxes over with sooner, it can also push you into much higher federal tax brackets, dramatically increasing the amount you owe the IRS.

Remember, when you do a Roth conversion, every dollar you move into a Roth IRA is taxable that year. That’s because you were never taxed on that money when it went into your traditional retirement plan.

To avoid a huge tax hit, your best bet is generally to spread your Roth conversions over several years. That could make it possible to convert your money at lower tax rates.

Staying in a lower tax bracket could save you tens of thousands

To understand why a years-long Roth conversion often makes sense, it’s important to understand how the tax code works. Federal income taxes are progressive, meaning each additional dollar of taxable income can be taxed at a higher rate once you cross into a new bracket.

For 2026, single filers remain in the 24% federal tax bracket until taxable income reaches $201,775. Income above that threshold is generally taxed at 32%, with even higher rates applying as income continues to rise. That makes timing especially important when you’re planning a Roth conversion.

Suppose you’re a single retiree with $100,000 of taxable income before any conversion and you’d like to convert $500,000 from a traditional IRA into a Roth IRA. If you convert the entire $500,000 in one year, much of that money won’t be taxed at 24%. Instead, some of that conversion will spill into the 32% bracket, and much of it will spill into the 35% bracket.

Now, let’s say you convert your money to a Roth IRA over five years, moving about $100,000 per year during that time. That could allow you to stay within the 24% tax bracket for your entire conversion. And the difference in what you owe the IRS could be huge.

Paying 24% on a $500,000 conversion versus almost 35%, which is what you’d typically be looking at in the above scenario, could result in savings of more than $50,000.

Your exact savings, of course, will depend on your income, deductions, state taxes, and other factors. The point, though, is that avoiding higher tax brackets could leave you with a lot more money.

A slower conversion strategy has other benefits

Keeping your tax rate lower isn’t the only advantage of spreading Roth conversions over multiple years. Large one-time conversions can also increase your adjusted gross income enough to trigger unexpected financial consequences.

For example, a higher income could push you into paying surcharges on Medicare premiums known as income-related monthly adjustment amounts. It could also affect the taxation of your Social Security benefits. By converting smaller amounts each year, you may be able to reduce those ripple effects.

You’ll also gain flexibility. If tax laws change or your financial situation changes, you can adjust future conversion amounts rather than be locked into one massive taxable event.

All told, Roth conversions remain one of the most powerful retirement tax-planning strategies available. But it’s important to execute your conversion strategically. So rather than move a large amount of money at once, try spreading your conversion out over many years so it doesn’t cost you as much in taxes.

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