Key Takeaways
- Since 2018, IRS rules haven’t allowed a Roth conversion to be recharacterized, or switched back, so a conversion that goes past its bracket can’t be fixed afterward.
- A married couple who convert up to the $100,800 top of 2026’s 12% bracket and then get $10,000 of unplanned income pay 22% on that $10,000, which is $1,000 more in federal tax.
- A 2026 conversion has to be done by Dec. 31, and podcast host Andy Panko warns against waiting until the last day.
- Couples can convert most of what they plan earlier and add the rest in mid-December, once they know the year’s income.
If you’re planning a Roth conversion this year, the last few weeks of December are when you finally know what your income looks like. That’s also when a surprise can cost you.
Since 2018, you can’t undo a conversion. So if late income pushes you past the bracket you planned around, it gets taxed at the higher rate, and nothing can be fixed after the fact.
Plan to the line, then get a surprise
Let’s say you and your spouse are both 63, file jointly, and want to move as much of a traditional IRA into a Roth this year as you can at 12%. You work out your 2026 income and convert just enough to put your taxable income right at $100,800, the top of the 12% bracket for joint filers. Then, in December, one of you gets a $10,000 year-end bonus from a part-time job that you hadn’t counted on. Your taxable income is now $110,800, and the conversion is already done.
6 safe dividend stocks paying retirees 6%+ yields
There are over 100 stocks paying 6%+ annual dividends today.
But after an extensive investment review leveraging TIKR’s proprietary data, we now believe only six of them are truly safe for retirees.
They’re all yours for free as part of our new investment report, which you can access right here.
Once it’s converted, it stays converted
Before 2018, a couple in this spot had a way out: recharacterize the conversion, which switched the money back to a traditional IRA as if it had never gone to the Roth. The Tax Cuts and Jobs Act ended that. The IRS’s Publication 590-A says a conversion made in a tax year beginning after Dec. 31, 2017, can’t be recharacterized. The ban covers traditional, SEP and SIMPLE IRAs converted to a Roth, plus rollovers into a Roth IRA from another eligible plan, like a 401(k) or 403(b). A regular IRA contribution can still be switched between a traditional and a Roth IRA, as long as the transfer is made by the due date of that year’s tax return, extensions included. A conversion doesn’t get that second chance.
The extra $10,000 costs $1,000
Under the IRS’s 2026 brackets, joint filers pay 22% on taxable income above $100,800, up to $211,400, where 24% starts. So all of that $10,000 bonus falls in the 22% bracket, for $2,200 of federal tax. If you’d converted $10,000 less, the bonus would have fit under the line and been taxed at 12%, or $1,200. That’s $1,000 more in tax on money you were getting either way, and with the conversion locked in, you can’t get it back.
The cost also grows with the overshoot. Every extra $10,000 over the line costs another $1,000 compared with 12%, all the way up to $211,400.
Leave yourself room in December
The deadline is firm, too. On Thursday’s episode of the Retirement Planning Education podcast, host Andy Panko went through year-end tax deadlines. He said that whether you convert at an IRA or inside an employer plan, “the conversion for 2026 has to be done before the 2026 calendar year ends.” He told listeners not to wait until Dec. 31 itself, even at a custodian that lets you convert online, and to leave themselves a week or more to spare.
A bonus isn’t the only thing that can show up late. Consulting income or more interest than you expected counts too. You have two ways to deal with that: either convert most of what you planned earlier in the year and add the rest in mid-December, once you know about any late income, or stop short of $100,800 on purpose and leave a little of the 12% bracket unused this year. Either way, put in the final request well before Dec. 31.
A modest price, but an avoidable one
Frankly, $1,000 on a $10,000 overshoot isn’t a disaster, and I’d rather go over a little than leave a big piece of the 12% bracket on the table out of caution. But if you hold back the last part of the conversion until mid-December, you’ll know almost all of the year’s income before you commit, so there’s not much reason to risk either mistake. Of course, $100,800 is only 2026’s line. The IRS adjusts the brackets for inflation every year, so in January you’ll be planning a 2027 conversion around a new number.
Enjoy your retirement in style with these safe 6%+ dividend yields
Dividends can hold the key to enormous wealth. But only if you buy the right ones.
Picking the right high-yield dividend stock can be the difference between a dream retirement…and scraping by every month, waiting for the next Social Security check to clear.
We’ve identified six stocks yielding 6%+ that we believe every retiree should know about right now.
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!
