Choose an explicit flat-rate assumption or 2026 federal bracket-only incremental income tax. Enter a reviewed Form 8606 nontaxable allocation separately and reserve nonconvertible RMD dollars. Conversion-induced Social Security inclusion, deduction and credit changes, capital-gain stacking and early-distribution penalties remain outside the income-tax model. The optional 2026 ACA calculation estimates allowed PTC lost under its stated coverage assumptions; it is separate from income tax and excluded from projected wealth, as is the CMS 2026 Medicare reference.
The Core Math — Tax-Rate Arbitrage
Choose an explicit flat-rate assumption or 2026 federal bracket-only incremental tax: tax(base taxable income + taxable conversion) minus tax(base). Enter Form 8606 nontaxable allocation separately and reserve nonconvertible RMD dollars. The model excludes conversion-induced Social Security inclusion, deduction/credit changes, capital-gain stacking, ACA and early-distribution penalties. Outside-funded tax includes foregone after-tax brokerage growth, including losses. Staged tools assume fully pretax funds; future brackets are scenarios, not verified tax law.
When Conversions Win — Gap-Year Strategy
Compare a stated current tax model with assumed future rates, returns and conversion timing. Staging may change bracket costs, but does not always win. RMD start age depends on birth cohort, and future premium and tax schedules are not verified by this projection. Interpret the modeled wealth difference as conditional, not a recommendation or lifetime-tax guarantee.
When Conversions Lose — Wrong Timing
Conversions destroy value when you convert at a higher current rate than your future rate, when you pay the tax from the IRA itself (which converts pre-tax dollars at your marginal rate just to pay the tax), or when conversion pushes you into a higher tax bracket or IRMAA threshold. Common timing mistakes: converting during peak earning years at 32–37% marginal rates when retirement income will be 22% or less; converting amounts large enough to push you into the next bracket; converting in years when capital gains or stock-option exercises already maxed your tax bracket. The 5-year conversion rule also matters — if you might need converted dollars within 5 years and you are under 59.5, the 10% penalty on early withdrawals can offset the conversion benefit.
Secondary Considerations
Beyond the core tax-rate math, several secondary factors favor conversion. First, no RMDs: Roth IRAs have no required distributions during the owner's lifetime, allowing decades of additional tax-free compounding. Second, IRMAA management: lower Traditional balances mean smaller future RMDs and lower MAGI, reducing Medicare premium surcharges. Third, estate planning: Roth dollars pass to heirs income-tax-free, while Traditional dollars require heirs to pay income tax on distributions. Fourth, state tax: if you expect to retire in a higher-tax state than your current state, converting now locks in the lower current state rate. These secondary factors can tip a marginal decision toward conversion even when the federal rate differential is small or zero. Use this calculator to model both the headline tax math and the longer-term secondary benefits.