Roth Conversions

When Does a Roth Conversion Actually Make Sense? Find Your Tax Window

Written By: Dan Pascone
Desk with hourglass, coins, notebook, calculator, and papers overlooking a sunset view
TL;DR: A Roth conversion does not erase tax. It moves it forward. So it only pays off if you convert during your low-income years, the window between the day your paycheck stops and the day required distributions and Social Security take over your tax return. That window is set by your own income calendar, not by Washington.

- Congress removed the 2026 rate sunset, so the deadline everyone was racing has gone away. Your personal window did not.

- The "year after I retire" is usually a false window: severance, deferred comp, vesting equity, and a working spouse can keep income above $400,000.

- In the case below, waiting instead of converting deliberately costs one family more than $1.7 million in today's dollars.

The deadline you were watching was the wrong one

For years, every Roth conversion conversation ran on one deadline: convert before 2026, because tax rates were scheduled to jump. Then Congress removed the scheduled sunset, and the countdown quietly disappeared. Most people landed on the same conclusion: no deadline, no rush.
That may be the wrong conclusion. Washington's deadline was never the one that mattered for you. The deadline that actually decides this sits on your own income timeline, and almost no one thinks to look at it.
A Roth conversion does not eliminate tax. It accelerates it. You are choosing to pay the IRS now instead of later, and under current law, once it is done it generally cannot be undone. So the real question is never "can we afford the tax this year." It is whether paying now leaves the family with more after-tax wealth later. And that answer depends on one thing: how many low-income years you actually have before required distributions and other fixed income sources take control of your return.

Watch last week's video for the full walkthrough.

The cost of doing nothing (a real example)

Consider a 58-year-old executive, married to a spouse who is 56, leaving his corporate role at the end of the year. They have $3 million in pre-tax accounts, $450,000 in a Roth, $1.5 million in a brokerage account, and cash on the side. On paper, the perfect Roth conversion candidate.
If they do nothing, that $3 million grows untouched for 15 years until required distributions start at age 73. By then it is roughly $6.4 million. The first required distribution alone is about $230,000, whether they need the money or not. Over their lifetime, doing nothing costs this family about $3.4 million in taxes. That is the number sitting in front of them before anyone converts a single dollar.

Why the "retirement year" is a false window

Here is the part that surprises people. Most look at this household and assume the fix is obvious: he retires, his income drops, and the next year he starts converting. But look at what actually happens to their income after his last day.

The year after he leaves, he is still recognizing around $250,000 in severance, deferred comp, and vesting equity. His spouse is still working. He has picked up consulting. Add it up and they are still over $400,000 in income. That year looks like retirement, but it is a false window. It is the same exit-year trap that plays out with how deferred compensation is actually taxed, where post-exit income quietly eats the low brackets you meant to use.

Every income timeline has three phases:

1. The earnings tail. The money that keeps landing after your W-2 stops: severance, RSUs still vesting, deferred comp on a schedule you set years ago, a board seat, a working spouse. Your paycheck can stop long before your income does.

2. The income control window. Your baseline drops and you finally control how much taxable income to recognize. This is the phase Roth conversions are built for.

3. The retirement income floor. Social Security switches on and required distributions force money out whether you need it or not.

For this couple, the true window opens at 62 and starts closing at 70 when Social Security turns on. Eight years. And they spent the first three of them thinking they were already in it.

Five ways to play the window

Inside that window there are five paths, and they are not created equal.

1. Do nothing. Simple, comfortable, and it quietly builds a large future tax bill for a surviving spouse.

2. Fill the 22% bracket. Moves about $1.25 million out over 11 years for roughly $260,000 in tax.

3. Fill the 24% bracket. Means writing tax checks of about $700,000 over those same years.

4. A dynamic conversion. Recalculated every year based on actual income, brackets, your state, Social Security, and what your heirs will inherit.

5. Convert the entire account in a single year.

In this household, filling the 24% bracket finished on top, with the dynamic strategy landing about $300,000 behind it. But the dynamic version got there at a lower effective rate, 14% versus 16%, and paid about $34,000 less in Medicare surcharges. The gap between a good strategy and the best strategy is small. The gap between doing nothing and either one is large.

What conversions actually buy

The tax-savings number is the least interesting part. Here is what these years are really purchasing, comparing the two clean endpoints, doing nothing versus running it dynamically. Do nothing versus a dynamic conversion:

- Future IRA balance at 73: about $6.4 million versus about $2.2 million.

- First-year required distribution: about $230,000 versus about $81,000.

- Surviving spouse's annual federal tax: about $156,000 versus about $39,000.

- Lifetime Medicare surcharges (IRMAA): about $164,000 versus about $106,000.

Lower required distributions. Do nothing and they face $6.4 million in the IRA throwing off $230,000 a year. Run it dynamically and it is closer to $2.2 million and $81,000. Fill the 24% bracket and it drops to $1.1 million and $49,000.
Protection for whoever outlives the other. Statistically, one spouse files as a single taxpayer for five to ten years or more, with the same income but half the standard deduction and compressed brackets. Doing nothing leaves the surviving spouse paying about $156,000 a year in federal tax. The dynamic strategy drops that to about $39,000. That is $117,000 a year, potentially for a decade.
Lower Medicare costs for life. Conversions push premiums up in the years you convert, which feels backwards. But doing nothing cost this family about $164,000 in lifetime Medicare surcharges. The dynamic strategy cost $106,000. A temporary spike in exchange for a permanently lower income.

What most people miss

The mistake is not being too cautious with the tax bill. It is misreading the calendar. People assume the Roth deadline died with the 2026 sunset, so there is no rush, or they plan to start converting "the year after I retire" without realizing the earnings tail keeps that year crowded. Either way, the window narrows while they decide, at roughly $300,000 in lost conversion capacity per year.
The window is not your retirement date. It is the stretch of genuinely low-income years between your earnings tail and your retirement income floor. Miss that distinction and you can spend the first several years of an eight-year window sitting on the sidelines, convinced you are already playing it.

How to find your own window

Six steps.

1. Map your entire income calendar. Every source, every year. You cannot find your window by looking only at your retirement date, which is exactly why an executive income and equity calendar matters.

2. Find your actual taxable income capacity in your target bracket.

3. Price the hidden costs. A conversion can raise state taxes, trigger Medicare surcharges two years later, and change how much of your Social Security is taxed.

4. Model the future household, not just this year's return, including the surviving spouse and your heirs.

5. Confirm where the tax gets paid from and how long that Roth money can stay invested.

6. Execute annually. Never on a target you set five years in advance and follow blindly. This is where a Quarterly Strategy Rhythm, a standing quarterly review of the plan rather than a once-and-done decision, earns its keep. It is the same "close the window before it closes on you" idea behind planning to retire at 53 with a coordinated tax strategy.

A concrete before and after

Before: You assume the Roth deadline died with the tax law, so there is no rush. Or you plan to start converting "the year after I retire," not realizing your earnings tail keeps that year crowded. Either way, the window quietly narrows while you decide, at roughly $300,000 in lost conversion capacity per year.
After: You know exactly when your window opens and closes, mapped against your real income calendar. You convert deliberately in the open years, protect your spouse from the single-filer tax cliff, and hand your heirs more of what you built instead of a tax bill.

Who this is for

This is written for the executive in their 50s or early 60s with a large pre-tax balance, an exit on the horizon, and an earnings tail of severance, deferred comp, or vesting equity trailing behind their last day. If you have $1 million-plus in a 401(k) or IRA, a working spouse, and a few genuinely low-income years coming before Social Security and required distributions start, the window this article describes is yours to use or lose. It is not written for someone decades from retirement in their peak earning years.

Frequently asked questions

When does a Roth conversion make sense?

When you have low-income years before required distributions and Social Security take over your tax return, and paying tax now at a lower rate leaves your family with more after-tax wealth later. The conversion is worth it inside that window and rarely worth it while you are still recognizing high income from your earnings tail.

Now that the 2026 tax sunset is gone, is there still any reason to convert?

Yes. The federal deadline was never the real constraint. Your personal window (the low-income years between your earnings tail and your retirement income floor) still opens and closes on a fixed schedule. Removing the rate sunset changed the urgency, not the math.

How many years do I have to do Roth conversions?

However many low-income years sit between your earnings tail ending and Social Security plus required distributions beginning. In the example above that window is eight years, from 62 to 70, but yours depends entirely on your own income calendar. Timing an early exit well is a big part of it, which is why we map it the same way we do when planning to avoid the costly mistakes in the final year before early retirement.

Do Roth conversions really help my spouse?

Often more than they help you. When one spouse dies, the survivor usually files as a single taxpayer, with the same income but half the standard deduction and compressed brackets. Converting during your window can cut the survivor's annual federal tax dramatically, by roughly $117,000 a year in the case above.

What are the hidden costs of a Roth conversion?

A conversion can raise your state income tax, increase how much of your Social Security is taxed, and trigger higher Medicare premiums (IRMAA) about two years later. None of these show up on the conversion itself, which is why they get missed. A real conversion plan prices them in before you commit.

Ready to find your own tax window?

At Tailored Wealth, this is the work. We map your income calendar, your bracket capacity, and your surviving-family picture onto one timeline using professional planning software, then model every conversion strategy side by side before you commit to any of them. We sit between you and the complexity, not to sell you on converting everything and not to talk you out of it, but to run the actual math on your family so the decision is deliberate instead of driven by fear of taxes or a deadline that no longer exists.

If you want to see where your own tax control window opens and closes, book a Free Wealth Strategy Call and we will map your income calendar, bracket capacity, and family picture on one page.

Book a Free Wealth Strategy Call

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