The Roth Conversion Ladder: Sizing Conversions Year by Year
How to fill the 12%, 22% or 24% bracket with Roth conversions between retirement and RMDs — guardrails for IRMAA, capital gains and the survivor year.
The window
For most retirees the years between the last paycheck and the start of Social Security and required minimum distributions are the lowest-taxed years of their life. Income drops to dividends and a little portfolio withdrawal, while the standard deduction and the bottom brackets sit unused. Every unused dollar of low-bracket space in those years is a permanent loss — brackets do not carry forward.
How to size a single year's conversion
- Start from projected taxable income before any conversion.
- Choose a ceiling: the top of the 12%, 22% or 24% bracket.
- Check the binding constraint first — often it is an IRMAA tier or the top of the 0% long-term capital gains band, not the bracket itself.
- Convert the difference, and pay the tax from taxable assets, never from the conversion.
Paying the tax from outside the IRA is what makes the conversion economically a contribution of extra dollars into tax-free space. Withholding from the conversion shrinks the Roth and, before 59½, can add a penalty.
The guardrails
- IRMAA. Surcharges are cliffs based on MAGI from two years prior. Stopping a few thousand dollars short of a tier is usually correct.
- Capital gain stacking. Conversion income pushes qualified dividends and long-term gains out of the 0% band into 15%, an invisible surtax on the conversion.
- ACA premium credits. Before Medicare, conversions raise MAGI and can claw back subsidies at a steep effective rate.
- State tax. Some states exempt part of retirement income but tax conversions in full; moving states mid-plan changes the answer.
Why the ladder usually beats one big conversion
Tax rates are progressive, so a single large conversion pays top-bracket rates on its last dollars while spreading the same total across eight years may keep every dollar at 22% or below. The exception is a one-off low-income year — a gap year, a large business loss, or a year of heavy deductible medical expense — where concentrating makes sense.
Two often-missed reasons to convert more
- The survivor year. When one spouse dies, the survivor files single on roughly the same income — half the brackets, half the IRMAA thresholds. Conversions done while both are alive are done at joint rates.
- Heirs. Most non-spouse beneficiaries must empty an inherited pre-tax IRA within 10 years, typically during their highest-earning decade.
Educational modeling only. Bracketwise is not tax, legal or investment advice.