How Much Should You Convert to a Roth IRA Each Year?

If you have a large traditional IRA or 401(k), I don’t want you waiting until retirement to start thinking about a Roth conversion. Convert too little and you could miss a tremendous tax-planning opportunity. Convert too much in a single year and you could unnecessarily push yourself into a higher tax bracket and create other tax consequences you weren’t expecting.

There’s a sweet spot, and finding it is what I call chunking. Instead of blindly converting your entire traditional retirement account at once, we look at your tax brackets, your other income, available deductions, and the total tax cost of the conversion. Then we strategically move chunks into Roth over time.

Why I Love Roth Accounts

I’m a huge fan of Roth accounts, and I use them myself. There are three big reasons why.

First, I know what my tax rate is today. I don’t know what my tax rate will be 10, 20, or 30 years from now. With a traditional retirement account, I may get a tax deduction today, but eventually that money comes out and I generally pay tax on the distributions. With a Roth, I’m willing to rip the Band-Aid off now, pay the tax, and build wealth that can potentially come out tax-free later when the requirements are met.

Second, people love to point out the immediate tax deduction that can come with traditional retirement contributions. Fair enough. But for the traditional account to really compete with the Roth on an after-tax basis, you have to account for what happens to those tax savings. Are you actually investing them? A lot of people aren’t. They spend the money.

Finally, I love the flexibility. Roth IRAs do not require lifetime required minimum distributions for the original owner, and Roth IRA contributions and conversions have different distribution rules than traditional IRA dollars. That can create more flexibility as you build your retirement strategy.

But don’t oversimplify the five-year rule. Each Roth conversion has its own five-year period for purposes of the 10% early-distribution penalty on taxable converted amounts, and separate rules determine whether Roth earnings are part of a qualified tax-free distribution. Your age and other exceptions matter too.

The bigger point is this: if I can afford the tax cost and the overall strategy makes sense, I want to look for opportunities to move traditional retirement dollars into Roth intentionally. The question is how much.

What Is a Roth Conversion?

A Roth conversion is exactly what it sounds like. You take money that is currently sitting in a traditional IRA or other eligible pre-tax retirement account and move it into a Roth account.

There’s no income limit that prevents you from doing a Roth conversion. However, the taxable portion of the amount converted is generally included in your income for that year. That’s why you don’t simply wake up one morning, convert $500,000, and celebrate.

We need to know what that additional income is going to do to the rest of your tax return.

And don’t confuse a Roth conversion with the Backdoor Roth strategy. A Roth conversion involves moving existing traditional retirement dollars into Roth. The Backdoor Roth strategy generally involves making a current nondeductible traditional IRA contribution and then converting those dollars to Roth. They may both involve conversions, but they’re solving different planning problems.

How Much Should You Convert to Roth Each Year?

Here’s where we get into chunking.

I want to look at how much room you have left in your current tax bracket before the next major jump. For 2026, there are seven federal individual income tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Two jumps immediately get my attention: going from 12% to 22%, and going from 24% to 32%. For a single taxpayer in 2026, the 24% bracket ends at $201,775 of taxable income. For married couples filing jointly, it ends at $403,550. Above those amounts, the next dollars of taxable income begin falling into the 32% bracket. That doesn’t mean you should never convert dollars at 32%. It means we need to recognize what’s happening before we cross that line.

Let’s say you’re married filing jointly and, after your deductions, you expect to have $350,000 of taxable income. You also have $100,000 sitting in a traditional IRA that you want to convert. If you convert the entire $100,000, you’ve now pushed part of that conversion beyond the top of the 24% bracket and into the 32% bracket. Maybe that still makes sense. Maybe it doesn’t.

But what if instead you convert about $50,000 this year and then evaluate converting another $50,000 next year? Assuming your income and the tax law cooperate, you may be able to move the same $100,000 into Roth while avoiding unnecessarily pushing as much of the conversion into a higher bracket. That’s chunking.

I’m not trying to convert the biggest number possible just so I can say we did it. I’m trying to determine how much we can strategically convert at a tax cost that makes sense.

Your Tax Bracket Is Only Half of the Strategy

Now we get to the fun part.

The first question is how much Roth conversion income your tax brackets can absorb. The second question is whether you have a legitimate tax deduction somewhere else that can help offset the income created by the conversion. This is where tax planning becomes very different from tax preparation.

Imagine you know you want to convert $100,000 from traditional to Roth, but you’re also planning a legitimate business or investment transaction that could generate a substantial current-year deduction. Instead of looking at those two decisions separately, I want to put them on the same tax-planning board.

Can the deduction help offset some or all of the income created by the conversion? If it can, we may have an opportunity to move significantly more money into Roth without creating the same net increase in taxable income.

How I Combined a Roth Conversion With a Real Estate Strategy

Let me show you what this can look like in the real world.

I had clients who owned a triplex they had purchased for approximately $400,000. They had put another $100,000 into the property, giving them roughly $500,000 of basis, and the property had grown to approximately $800,000 in value. At the same time, they had about $500,000 sitting in a traditional IRA that they wanted to move into Roth. We had two separate planning issues sitting in front of us: appreciated real estate and a large traditional retirement account.

Rather than selling the triplex and simply recognizing the gain, we structured a Section 1031 exchange. After dealing with the mortgage, the clients had approximately $500,000 available to reinvest. They used that money toward the purchase of two short-term rentals totaling approximately $1.5 million. Then we looked at depreciation.

The short-term rentals created an opportunity to analyze material participation and bonus depreciation. One of the material-participation tests requires more than 100 hours of participation during the year and participation at least equal to that of any other individual. So this is not simply “own a short-term rental and get a giant write-off.” The participation and other tax requirements have to be satisfied.

In this case, the clients were able to legitimately participate in preparing and operating the properties, and the overall strategy generated substantial depreciation. Now put the pieces together.

We had a 1031 exchange deferring gain on the disposition of the original investment property. We had two new income-producing properties. We had substantial depreciation deductions. And we had traditional retirement dollars that the clients already wanted to convert. Instead of looking at each transaction in isolation, we coordinated them. That’s tax advisory.

I don’t want you manufacturing deductions just so you can do a Roth conversion. I want you looking at legitimate financial and investment decisions you’re already considering and asking how they can work together within a larger tax strategy.

A Roth Conversion Can Affect More Than Your Tax Bracket

This is where a lot of online Roth conversion calculators fall short. They’ll ask for your taxable income, calculate how much room you have left in a bracket, and spit out a conversion amount. That’s useful, but it isn’t enough.

The real question I want answered is: What is the total marginal cost of converting the next dollar? There are several other issues we need to consider.

Medicare IRMAA

If you’re approaching Medicare age, a large Roth conversion can increase your income enough to affect your future Medicare income-related monthly adjustment amount, commonly called IRMAA.

That matters because Medicare generally uses tax-return information from two years earlier to determine whether an income-related adjustment applies. A conversion you make before enrolling in Medicare can therefore potentially affect premiums later.

This doesn’t automatically mean you shouldn’t convert. It means the additional Medicare cost needs to be included in the calculation.

Net Investment Income Tax

A Roth conversion itself is not net investment income. But because a taxable conversion generally increases adjusted gross income, it can affect whether other investment income becomes exposed to the 3.8% Net Investment Income Tax.

For individuals, NIIT applies to the lesser of net investment income or the amount by which modified adjusted gross income exceeds the applicable threshold. Those thresholds are $250,000 for married couples filing jointly and $200,000 for single taxpayers and heads of household. Again, we have to look at the entire tax return.

State Income Taxes

Where do you live? If your state taxes Roth conversions as income, the federal tax bracket is only part of your cost. A conversion that looks attractive when you only consider federal income tax may look very different after adding state income tax.

This can become especially important if you expect to change residency in the next few years. Maybe converting today makes sense. Maybe waiting until you establish residency in a lower-tax state makes more sense. Run the numbers before you convert.

Alternative Minimum Tax and Other Income-Based Tax Provisions

Higher income can interact with deductions, credits, phaseouts, and other provisions throughout the tax return. Depending on your situation, Alternative Minimum Tax may also need to be modeled. That’s why I don’t want you making a six-figure Roth conversion based solely on one tax-bracket chart.

Don't Assume the Tax Can Wait Until April 15

There’s one more point from the video that I want to clarify.

Yes, the Roth conversion is ultimately reported on the tax return for the year of the conversion. But that does not necessarily mean you can convert in January and simply wait until the following April to think about paying the additional tax.

The federal income tax system is pay-as-you-go. Depending on your situation, you may need additional withholding or estimated tax payments during the year to avoid an underpayment penalty.

And whenever possible, I prefer planning for the conversion tax with money outside the retirement account. I want as much of that converted money as possible sitting inside the Roth and working for your future.

Build a Multi-Year Roth Conversion Plan

If you have a substantial traditional IRA or 401(k), don't think of Roth conversion planning as a one-time transaction. Think in years.

Maybe this year you have room in the 24% bracket. Maybe next year you expect your business income to fall. Maybe you’re selling a rental property three years from now. Maybe you’re approaching Medicare. Maybe you’re retiring soon and expect a temporary drop in taxable income before other retirement income begins. Those events belong on the same timeline.

I want to know when income is likely to spike, when deductions may be available, when you have room in favorable brackets, and when other tax consequences could make a conversion more expensive. Then we start chunking.

You may convert $30,000 one year, $100,000 the next, and nothing the year after that. There isn't one magic Roth conversion amount that works for everyone. The strategy is finding the amount that works for you, in that particular tax year, as part of the bigger plan.

The Bottom Line

If you have a large traditional IRA or 401(k), don't wait until retirement to finally ask what you're going to do with it. Start building a multi-year Roth conversion strategy now. Look at your tax brackets, expected income, deductions, investments, state taxes, Medicare exposure, and other taxable events and figure out when those pieces create opportunities to move more money into Roth.

This is exactly the type of planning I want done before the conversion happens. Book a Comprehensive Tax and Business Consultation with my law firm, KKOS Lawyers. We can model your current tax picture, look ahead at the next several years, and help you determine when and how much it makes sense to convert rather than guessing at a number. And if a Roth IRA, Solo 401(k), or self-directed retirement strategy is part of the plan, Directed IRA can help you get the right account in place.

Don't wait until retirement to discover you had years of opportunities to strategically move money into Roth. Build the conversion plan now, then take advantage of the right tax windows as they open.

Frequently Asked Questions

Is there an income limit for Roth conversions?

No. Income limits can restrict direct Roth IRA contributions, but they don't prohibit Roth conversions.

Do I have to convert my entire traditional IRA at once?

No. You can make partial Roth conversions and spread them across multiple tax years.

Does a Roth conversion automatically push all my income into a higher tax bracket?

No. Tax brackets are marginal. Only the dollars that cross into a higher bracket are taxed at that higher rate.

Can a tax deduction offset Roth conversion income?

Potentially. A legitimate deduction can reduce taxable income in the same year as a Roth conversion.

Is a Roth conversion the same as a Backdoor Roth IRA?

No. A Roth conversion moves existing retirement funds into Roth. A Backdoor Roth generally involves making a nondeductible traditional IRA contribution and then converting it.

Should I pay the Roth conversion tax from the IRA?

Generally, using outside funds allows more of the converted money to remain invested in the Roth.