Key Takeaways
- A couple who are almost 52 and 54, with a joint AGI of $280,000-plus, asked whether to convert their $350,000 of traditional IRAs to Roth now or after they retire.
- Converting all of it this year would cost $102,101 in federal tax, because most of it would fall in the 32% and 35% brackets.
- If they wait until both have stopped working and have no other taxable income, converting $70,000 a year for five years would cost $20,200 at 2026’s figures.
- Waiting only works if their spending comes from untaxed money and each year’s conversion stays under the ACA’s subsidy limit.
If you’re in the 24% bracket with money in a traditional IRA, a Roth conversion can look like a simple question: is 24% a good price? But a big conversion lands on top of your paycheck, and it can blow right past the top of your bracket.
A poster in Reddit’s r/personalfinance forum is weighing exactly that. She’s almost 52, her husband is 54, and their combined AGI is $280,000-plus. They have $1.77 million saved, and $350,000 of it is in traditional IRAs they could convert. They’d like to retire at 60 (she’d work two more years after he stops), and she asked whether to start converting “now, even though we are in the 24% tax bracket, or wait until we are not working.”
Fair question. Their 24% bracket is a lot shorter than it looks.
A 24% bracket only goes so far
A conversion counts as ordinary income in the year it’s made. That means it stacks on whatever else the couple earns that year, and this year’s conversion has to be done by Dec. 31. For a married couple filing jointly in 2026, the IRS’s brackets put the 24% rate on taxable income over $211,400, the 32% rate over $403,550 and the 35% rate over $512,450. The 37% rate doesn’t start until $768,700. Before any of that, they get the $32,200 standard deduction for joint filers. At the bottom of the scale, the first $24,800 of taxable income is taxed at 10%, and the 12% rate runs up to $100,800.
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Converting it all now: $102,101
Start with their $280,000 of AGI. Take off the standard deduction, and they’re at $247,800 of taxable income before converting a dollar, which is already well into the 24% bracket. Add the $350,000, and taxable income jumps to $597,800. The conversion gets taxed in three slices:
- $155,750 at 24%, up to $403,550: $37,380
- $108,900 at 32%, up to $512,450: $34,848
- $85,350 at 35%: $29,872.50
That’s $102,101 in federal tax across the three brackets, or more than 29 cents of every dollar converted. Ouch. Less than half of the conversion actually gets the 24% rate she’s counting on.
Wait, and it’s $20,200
Now say they wait until both have stopped working and pay for their spending with untaxed money, so they have no other taxable income. If they convert $70,000 a year for five years, each year’s taxable income is $37,800 after the standard deduction. The first $24,800 is taxed at 10%, or $2,480, and the other $13,000 at 12%, or $1,560. That’s $4,040 a year and $20,200 over five years at 2026’s figures. It works out to under 6 cents on the dollar, and $81,901 less than converting it all this year.
There’s even room to spare. The 12% rate runs to $100,800 of taxable income. At 2026’s figures, they could convert up to $133,000 a year ($100,800 plus the $32,200 deduction) without paying more than 12% on any of it. So the tax brackets wouldn’t be the thing holding them back.
They’ll need something to live on
They only pay $20,200 if their taxable income really is that low, and she estimates they’ll spend $144,000 a year in retirement. Five years of that is $720,000, which is more than the $620,000 they have in Roth and HSA accounts today. Anything they pull from the $800,000 of tax-deferred money outside the IRAs, or from the Social Security she plans to claim at 62, adds income on top of each year’s conversion.
Health insurance is the other squeeze. She wants to keep their income low enough for ACA subsidies until Medicare. Under the IRS’s rules, the Premium Tax Credit goes only to households with income of no more than 400% of the federal poverty line, a cap Congress lifted only for tax years 2021 through 2025. A conversion counts toward that income too. And for tax years after 2025, there’s no cap on paying back advance credits that turn out to be too high. A conversion that pushes them over the line could cost them the whole year’s subsidy. So each year’s conversion, plus everything else they draw, has to fit under that year’s poverty line.
I’d wait, and convert in slices
She also notes that Social Security’s retirement fund is predicted to run out of reserves around 2032, and she worries tax rates will climb before then. That’s the best case for converting some of it now. If they converted only up to the top of the 24% bracket this year, $155,750, it would cost $37,380 and stay clear of 32% and 35% entirely. But that’s still 24 cents on the dollar against under 6 cents later, so rates would have to climb a long way to close that gap.
Here’s where I land: converting all $350,000 this year is the one clearly bad option, since they’d pay the IRS $81,901 more than they would by waiting. I’d wait, plan their first retirement years around keeping taxable income low, and size each year’s conversion to the ACA limit.
Of course, they’re about eight years from both being retired. If more of their spending ends up coming from the 401(k)s than from Roth money, each later conversion stacks on that income and the gap shrinks.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
