Roth conversions are widely recommended as one of the smartest moves you can make heading into retirement. Move money from your traditional IRA to your Roth, pay taxes now at a lower rate, and enjoy tax-free growth and withdrawals for the rest of your life. For many people, that strategy works exactly as intended.
The problem is execution. A poorly timed or poorly sized conversion does not just fail to help you. It can actively cost you tens of thousands of dollars in taxes and secondary costs that are easy to miss if you are only running a surface-level calculation.
At Quarry Hill Advisors, tax-efficient Roth conversion strategies are a core part of what we do for pre-retirees. What we see consistently are three specific execution mistakes that turn a smart strategy into an expensive one. Here is how to identify them and what to do instead.
The most common mistake is believing you should convert as much as possible, as quickly as possible. Rip off the bandaid, move everything to Roth, and be done with it. The logic seems sound: simplicity, protection against future tax rate increases, and more tax-free growth. But the math tells a different story.
Every dollar you convert is added to your taxable income for that year. Because our tax system is progressive, the more income you have, the higher rate you pay on each additional dollar. Consider this scenario: you are 64 years old, recently retired, and have $600,000 in a traditional IRA. Your other income for the year is $40,000 from a pension and investment income, putting you comfortably in the 12% federal bracket.
If you convert the entire $600,000 in a single year, the first portion fills up the remaining room in your 12% bracket, then you move into 22%, then 24%, then 32%. Your total federal tax bill on that conversion lands somewhere between $130,000 and $140,000.
Now compare that to spreading the same $600,000 over six years, converting $100,000 per year. Each year you stay within the 22% or 24% bracket. Your total federal tax bill over those six years: $90,000 to $100,000.
That is a $40,000 to $50,000 difference, purely from timing. The goal of Roth conversions is not to move everything to Roth as fast as possible. The goal is to convert at the optimal tax rates. Every dollar converted at 32% that could have been converted at 22% is money handed to the IRS unnecessarily.
Timing a conversion well means understanding where you are in your financial timeline. There is a window in most people's lives that is particularly valuable for Roth conversions: the period after you stop working but before your required minimum distributions begin at age 73. During these years, your income is often at its lowest point in decades. You are no longer drawing a salary, Social Security may not have started yet, and RMDs are not yet forcing money out of your accounts. Tax brackets are relatively low and there is room to convert meaningful amounts without triggering higher rates.
Two common timing mistakes undermine this opportunity. The first is converting while still working. If you are earning $250,000 per year and you layer a $100,000 conversion on top of that, you are paying taxes at your highest marginal rate with almost no benefit.
The second is waiting too long. Many people intend to convert next year when things settle down. Then another year passes, RMDs start, and suddenly distributions are mandatory for the rest of your life. Your income goes up, your bracket goes up, and the conversion window has closed.
There is also a technical timing issue worth knowing. Roth conversions must be completed by December 31st of the tax year. There is no April extension the way there is for contributions. If you want a conversion to count for a given tax year, the money has to move before year end.
This is why the most strategic conversions typically happen in September, October, or November. By Q4, you have a clear picture of your income for the year, you can calculate precisely how much room remains in your target tax bracket, and you still have time to execute before the deadline. Converting in January sounds proactive, but if an unexpected bonus, property sale, or other income event occurs later in the year, you cannot undo the conversion. The re-characterization option was eliminated in 2018, so you are locked into whatever tax consequences result.
Most people think about conversions as a straightforward calculation: convert $100,000 in the 24% bracket, pay $24,000 in federal taxes, done. That $24,000 is only the starting point. There are at least three secondary costs that can significantly increase the actual bill.
1. Medicare Premium Surcharges (IRMAA)
IRMAA stands for Income Related Monthly Adjustment Amount. It is a surcharge added to Medicare Part B and D premiums based on your Modified Adjusted Gross Income from two years prior. The surcharges jump in steps, not gradually.
For a married couple in 2026, income above $218,000 triggers an extra $81.20 per month per person for Medicare Part B. Cross the next threshold at around $276,000 and that jumps to an extra $203.40 per month per person. A large conversion that pushes income to $300,000 can add roughly $500 per month in combined Medicare costs for the following two years. That is $6,000 per year, and if ongoing conversions keep income elevated across multiple years, the total impact can reach $18,000 to $24,000. That cost never shows up in the conversion tax calculation, but it absolutely comes out of your pocket.
2. The Pro Rata Rule
The pro rata rule primarily affects people doing backdoor Roth contributions, but it can also impact conversion strategies. When you convert or distribute money from a traditional IRA, the IRS does not look at just the account you are converting from. It looks at all your traditional IRA balances combined.
If you have $100,000 in pre-tax traditional IRA money and you try to convert $10,000 of after-tax contributions thinking it will be tax-free, the IRS calculates what percentage of your total IRA balance is pre-tax versus after-tax and applies that ratio to your conversion. With 90% of your total IRA balance in pre-tax money, 90% of your conversion is taxable, regardless of which dollars you thought you were moving. This catches many people who roll over old 401(k)s into IRAs without thinking through how it affects their conversion strategy.
3. Social Security Taxation
Roth conversion income counts toward your provisional income, which determines how much of your Social Security benefit is subject to federal income tax. Depending on your income level, between 0% and 85% of your Social Security benefit can be taxable. When you add conversion income, you may not just be paying tax on the conversion itself. You may also be pulling more of your Social Security into the taxable column.
In certain income ranges, this creates what is known as the Social Security tax torpedo. For every additional dollar of conversion income, you are also making 85 cents of your Social Security benefit taxable. Your effective marginal rate can nearly double from your stated bracket. A conversion that appears to cost you 22% in taxes might actually carry an effective rate closer to 35% or more once you factor in federal taxes, state taxes, IRMAA surcharges, and the Social Security taxation effect.
A well-designed conversion strategy accounts for all of the above. Here is how the process works at Quarry Hill Advisors:
Map your tax brackets year by year. Project your income sources from now until RMDs begin, including pension income, Social Security timing, investment income, and any part-time work. Identify which years have room in the lower brackets and how much room exists. This gives you a multi-year conversion budget, so you know that in year one you can convert $80,000 and stay in the 22% bracket, and in year two, once Social Security starts, you can only convert $50,000, and so on.
Wait until Q4 to finalize conversion amounts. By September or October, your actual income for the year is clear. You can calculate precisely how much room remains in your target bracket and execute a conversion in October or November, leaving buffer time before the December 31st deadline.
Model all costs, not just federal tax. Calculate state income tax impact, check whether the conversion will push you into an IRMAA bracket two years from now, and model the Social Security taxation effect. Run the numbers for both spouses. Sometimes this analysis reveals that the optimal conversion amount for a given year is zero. Not converting is a valid answer. Other times it reveals you have more room than expected and should be more aggressive.
Plan for the survivor scenario. When one spouse dies, the surviving spouse moves from married filing jointly to single. Tax brackets for a single filer are roughly half the width of a married bracket, but RMDs continue at the same dollar amount and are now taxed at higher rates. Strategic conversions during your joint lifetime can dramatically reduce the tax burden on a surviving spouse. This is often the most compelling reason to pursue conversions, even when the immediate tax math looks relatively neutral.
Roth conversions are a valuable strategy. The conventional advice to pursue them is not wrong, but it is incomplete. The question is not whether to do Roth conversions. The question is how much to convert, in which years, while accounting for all the secondary and downstream effects.
Get it wrong, and you pay taxes you did not need to pay. Get it right, and you can potentially save six figures over the course of your retirement while creating greater tax flexibility for both you and a surviving spouse.
If you want to understand how this applies to your specific situation, we offer a complimentary retirement readiness review for professionals approaching retirement.
Kyle Moore is a CERTIFIED FINANCIAL PLANNER™ professional and founder of Quarry Hill Advisors. Quarry Hill specializes in helping pre-retirees navigate the retirement transition with comprehensive, tax-efficient planning strategies.
-A note from Kyle Moore, CFP®
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