Roth Conversion Planning Under Current and Pre-Sunset Law

Advisors spent the back half of 2025 fielding a version of the same question: does the Roth conversion case still hold now that the TCJA brackets aren't expiring? The case holds, but the reasoning behind it has changed completely. For nearly a decade, the dominant argument for converting was rate arbitrage against a known deadline: the TCJA brackets were temporary, and converting before 2026 meant locking in today's rate before it reset upward automatically. The One Big Beautiful Bill Act, signed July 4, 2025, permanently extended the TCJA's seven-bracket structure, with an initial inflation adjustment applied to the 10% and 12% brackets starting in 2026. No sunset remains on the books. The brackets that were scheduled to snap back upward, the 24% bracket reverting to a higher rate and the 32% bracket doing the same, are now permanent fixtures of the code unless a future Congress legislates otherwise.

That clock has stopped. But nothing about permanent brackets touches the structural reasons a given retiree's own effective rate climbs over time, regardless of what Congress does to the statutory schedule. Required minimum distributions still force income recognition on a fixed timetable. Surviving spouses still fall into a narrower single-filer bracket structure. Social Security benefits still become taxable as other income rises. None of those mechanisms depend on federal rate changes at all. The planning conversation has shifted, in other words, from racing a legislative deadline to managing a income curve that a household will live through no matter what the top marginal rate happens to be in any given year. What this removes is the "convert before rates go up" urgency narrative that drove aggressive conversions in 2023–2025.

What the 2026 bracket and deduction landscape looks like under permanent TCJA

The numbers advisors now plan against are stable, which is itself the point. Single filer brackets are roughly half the joint thresholds. The standard deduction for married-filing-jointly households in 2026 sets the floor below which no conversion income gets taxed at all, and each spouse who's 65 or older adds a further increment on top of that base.

There is no income restriction on conversions themselves, while Roth IRA direct contributions phase out at higher MAGI levels for MFJ in 2026.

• Conversions themselves carry no income restriction. Any client, at any income level, can convert traditional IRA balances to Roth. Direct Roth IRA contributions are a different animal entirely, phasing out at higher MAGI levels for joint filers in 2026, and clients frequently conflate the two rules in ways that cost them opportunity.
• The federal estate tax exemption is now permanent at a substantially higher level, both per individual and per couple. For clients whose original conversion rationale leaned on estate tax exposure under a sunset scenario, that particular argument has largely receded as background rather than a live planning driver.

The retirement income gap between leaving work and starting RMDs (where the conversion case now lives)

If the sunset argument is gone, the gap-year argument is what's left standing, and it's arguably stronger than the rate-arbitrage case ever was. For most retirees, the years between the last paycheck and the first required minimum distribution represent the lowest-bracket stretch of their entire adult life: no salary, Social Security often not yet claimed, and RMDs not yet forcing anything onto the return. RMDs now begin at 73 for anyone born between 1951 and 1959, and at 75 for anyone born in 1960 or later. A retiree born in 1960 who retires at 62 has 13 years of low-bracket space before RMDs begin, roughly twice the window available under pre-SECURE rules.

The mistake advisors see most often is waiting. Clients delay conversions until RMDs start, at which point the forced distributions themselves push taxable income higher and compress or eliminate the very bracket space the conversion strategy depended on.

The compounding logic here is illustrative rather than a guarantee: a given sum converted today, growing at a reasonable long-term rate over a decade or two, becomes a meaningfully larger pool of money that generates no future tax liability at all, distribution or growth. Congress does not need to ever raise rates again for that argument to hold. It depends only on time and on the fact that Roth growth is never taxed on the back end. Roth 401(k) accounts are no longer subject to RMDs at all, effective for tax year 2024. A client who wants to keep funds inside the plan for its investment menu, loan provisions, or state-level creditor protections can now do that without a forced distribution clock running against them. During this window, earned income is gone, Social Security may not have started, and bracket space is available at known, low rates.

How to size a conversion: bracket-filling mechanics and multi-year sequencing

The mechanics of sizing a conversion are simpler than the constraints that modify them. The core technique is bracket-filling: calculate the remaining room in the client's current bracket, and convert up to the top of that bracket without spilling into the next one, paying tax today at a known, visible rate. A married couple filing jointly and in the 24% bracket for 2026, with meaningful other taxable income already on the return, may still have real room to convert before the next dollar would be in the 32% bracket. Filling that space methodically, rather than converting a round number pulled from habit, is the entire discipline.

Multi-year modeling is where the real skill lives. The right amount to convert in year one depends heavily on the plan for years two through ten, since over-converting early can drain the pre-tax balance before the gap-year window closes, which wastes bracket space that will never be recovered later. Business owners with variable annual income tend to have more room to optimize year by year than W-2 employees whose income is fixed and predictable, simply because they can time conversions around lower-income years.

Two mechanical flags belong in every plan: no income restriction on conversions themselves, and Roth IRA direct contributions phasing out at higher MAGI levels for MFJ in 2026. Second, conversions are irrevocable, and the five-year rule on converted funds matters mainly for clients under 59½; for those older, it's largely moot, though a separate five-year clock applies to Roth earnings for anyone who has never held a Roth account before, which is reason enough to open one early even with a small amount. And for clients wondering whether backdoor Roth contributions survived OBBBA: they did. Earlier legislative proposals, notably the 2021 Build Back Better Act, would have closed that door, but none of those provisions were enacted. Under the pro-rata rule, all traditional, SEP, and SIMPLE IRA balances are aggregated, so clients cannot selectively convert only after-tax basis. The advisor technique is to roll pre-tax balances into a current employer 401(k) first, removing them from the aggregation pool.

IRMAA cliffs and the two-year lookback that shrinks the usable conversion window

Bracket room is only half the equation. Medicare's Income-Related Monthly Adjustment Amount operates as a cliff: cross the threshold by a single dollar, and the full surcharge applies for the entire year on all of it. That's a fundamentally different mechanism than the income tax brackets advisors are used to filling, and treating it the same way is a common and costly error.

The detail practitioners miss most often is the lookback. Modeling has to run forward, checking projected years against future thresholds. In practice, the 24% bracket extends to a fairly high level of taxable income, but the first joint IRMAA cliff typically bites well below that ceiling. Many couples size conversions to the IRMAA line rather than the bracket line, and build in a cushion against unexpected dividends or year-end fund distributions that could push them over unintentionally.

The golden pre-Medicare window is a particularly favorable stretch. A client who retires at 63 and won't enroll in Medicare until 65 has two years where the income reported sets the initial IRMAA tier, and because there's no salary and often no Social Security income yet, those two years can absorb larger conversions without triggering any surcharge at all. Advisors who miss this window lose it permanently; it doesn't come back once Medicare enrollment starts and the lookback clock is running against a different set of years. IRMAA uses a two-year lookback, meaning 2026 conversions affect 2028 premiums, so practitioners must model forward, not just at the current year.

The Social Security tax torpedo compresses conversion room for mid-income retirees

Conversion income doesn't just raise taxable income directly, it also raises what's called provisional income, the figure that determines how much of a client's Social Security benefit becomes taxable in the first place. Once provisional income crosses the relevant thresholds for single or joint filers, up to the statutory maximum share of Social Security benefits gets pulled into taxable income.

The mechanism practitioners need to hold onto is the interaction. Each additional dollar converted in this range can simultaneously trigger additional Social Security taxation. The true marginal rate on that conversion dollar runs higher than the bracket table shows on its face. Compounding the issue, these thresholds are fixed by statute under IRC § 86 and were never indexed for inflation, so they erode in real terms every year, quietly pulling more retirees into the torpedo zone over time.

For clients who haven't yet claimed Social Security, there's often a meaningful window to convert before this mechanism ever turns on. Once benefits start, every conversion decision in this income range has to be modeled against the combined effective rate, or the projection will understate the real cost.

The OBBBA senior deduction: a temporary reduction in taxable income that creates a hidden effective rate spike

OBBBA also introduced a new, temporary deduction for taxpayers 65 and older: a fixed amount per qualifying senior, available for tax years 2025 through 2028, stacked on top of the standard deduction and available whether or not the taxpayer itemizes. For a couple where both spouses have reached 65, that deduction doubles, which is a genuinely useful reduction in taxable income on its own.

The complication sits in the phaseout. The deduction begins reducing once MAGI on a joint return crosses a set threshold, shrinking at a fixed rate for every dollar above that line until it disappears entirely. Inside that phaseout range, a conversion dollar does double duty: it adds directly to taxable income, and it simultaneously erodes the senior deduction the client would otherwise have kept, adding a modest number of extra percentage points onto the effective marginal rate. It's a modest spike, but one not to wave away. Losing the full couple's deduction at a 24% marginal rate adds up to a meaningful dollar cost, which should be reflected precisely in the projection rather than rounded off.

One distinction deserves emphasis because it trips up otherwise careful planning: the senior deduction reduces taxable income, but it does not touch MAGI. It offers no relief for IRMAA, ACA subsidies, or the Social Security torpedo, since the senior deduction reduces taxable income but not MAGI, and those thresholds operate on MAGI regardless. That distinction produces a clean planning split. Conversions executed before Medicare enrollment, in the early 60s, sidestep both the IRMAA interaction and the senior deduction phaseout entirely and can typically be sized more aggressively. Conversions executed after Medicare enrollment have to respect the IRMAA cliff and the senior deduction phaseout at the same time, which demands tighter, more conservative sizing.

The widow's penalty: why converting during joint-filing years is a form of survivor insurance

When one spouse dies, the survivor moves to single filing status the following year, into brackets that are roughly half as wide as the joint brackets the couple had been using, even though most of the household's income keeps flowing in unchanged, including the pension, the Social Security benefit, and the RMDs. The survivor also crosses into single-filer IRMAA thresholds at a lower income level than the joint threshold the couple had cleared without issue for years.

Converting during the years both spouses are alive and filing jointly, while the wider MFJ brackets and both spouses' standard deductions are still fully available, gets ahead of that compression before it happens. This makes no claim at all about future tax legislation. It's a structural feature tied to RMDs, survivor filing status, and Social Security inclusion, none of which depend on federal rate changes.

Mandatory Roth catch-ups for high earners in 2026 fit into a coherent conversion plan

Starting January 1, 2026, catch-up contributions to a workplace retirement plan made by an employee age 50 or older whose prior-year FICA wages exceeded $145,000 (indexed for inflation, landing at $150,000 for 2026) must go into the Roth portion of the plan. Pre-tax catch-up contributions are no longer an option for anyone above that wage threshold.

That's a legislative push toward Roth dollars happening entirely on the contribution side, independent of anything the client or advisor decides to do with existing pre-tax balances. High earners are already being directed into Roth dollars by law, and a planned conversion layered on top of that creates a coherent tax-diversification strategy rather than an ad hoc one. Clients still in the accumulation phase need to understand that the mandatory Roth catch-up doesn't substitute for conversion planning. It addresses new contributions going forward; it does nothing about the pre-tax balance already sitting in the account.

Qualified charitable distributions as a conversion complement for charitably inclined retirees

A QCD lets an IRA owner send funds directly to a qualified charity, satisfying the RMD requirement, and that distribution never appears in MAGI. That matters directly for everything covered above: a QCD doesn't push a client toward an IRMAA cliff, doesn't feed the Social Security torpedo, and doesn't touch the senior deduction phaseout, because it never enters MAGI in the first place.

For 2026, the annual QCD limit is substantial, and a separate, lower cap applies to a one-time transfer into certain split-interest charitable arrangements. For a retiree who's already sized a conversion up to the IRMAA line and wants to preserve every bit of that headroom, directing charitable giving through a QCD rather than a check written after the RMD is taken keeps the MAGI number clean and leaves the conversion math untouched. It's a small piece of the plan, but for the right client, it keeps everything else from tipping over a threshold it took years of careful sizing to avoid.