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Roth conversion opportunities extended

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AUTHOR: John Yeigh on 7/09/2025
The new U.S. tax legislation extends today’s relatively low tax-rates that were implemented in 2017. While this tax legislation includes some new nuances that may impact retirees, the main tax-rate impact for Roth conversions has been extended for 2026 and beyond. Here are four reminders of the benefits and challenges with Roth conversions. “Roth on.”
Who should Roth:
https://humbledollar.com/2020/05/to-roth-or-not/
How Roth conversions can impact Medicare premiums:
https://humbledollar.com/2023/04/that-28000000-tax/
Rothing can lower future taxes especially when considering the widow’s tax after the first spouse passes and estate tax impacts:
https://humbledollar.com/2023/01/securing-lower-taxes/
Rothing may not gain ground on future RMD tax obligations due to growth in tax deferred accounts:
https://www.theretirementmanifesto.com/my-biggest-surprise-in-retirement/
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David Powell
1 month ago

We’re kicking off four years of conversions this year, using taxed account reserves. So many good reasons, as John has enumerated in this fine reminder of the merits and considerations of “Rothing”. Roth on, indeed.

stelea99
1 month ago

Giving support to the “My biggest surprise in retirement” article, I say that unless you are willing to do very large conversions, even with a 60/40 allocation, and even with making the Roth eventually 100% equities, you can’t reduce your current pre-tax IRA account value.

At age 59, 4 years after retirement, I did a few calculations and was aghast at what my IRA could become in 20 years. So, I got on the Roth conversion boat and over that 20 years I have converted 46% of the value of that age 59 IRA balance. The result is than now the Roth represents 55% of the combined Roth/Trad account values. This is despite taking 9 years of RMDs since age 70.5. AND, the IRA account value is still larger than it was 20 years ago. Had I not done the conversions, 100% of the difference in the RMD each year would be in the 24% bracket instead of the 22% bracket.

Of course, you have to do the math. I had retiree medical from my employer. Your circumstance will be different than mine were.

On a final note, for single filers, the 32% bracket begins at just $197300.

David Lancaster
1 month ago

Thanks for another post with excellent information John.

I’m experiencing what the last article describes as, “My Biggest Surprise in Retirement” which the author describes at the difficulty of performing a complete Rothification of my wife’s traditional IRA due to the compounding returns in her traditional account. Certainly a privileged problem to have.
While I did take advantage of the dip in the market in April to push forward three months of my planned conversions. From my past reading of investment information I knew it was advantageous to convert funds when the market is down because you can convert more shares per dollar converted. But in retrospect I wish I had converted more, but my philosophy is the same as Adam Grossman has written on Humble Dollar before which is to make smaller incremental changes to your portfolio.
One positives of the legislation which passed recently in Washington for those who are affluent and 65+ is the additional 6K deduction per person. This will allow us to convert that additional amount (12K in total) and still stay in the 12% tax bracket. Another tax break for the us while we personally add our share if ever so slightly to the Federal deficit.

Last edited 1 month ago by David Lancaster
Randy Dobkin
1 month ago

Not too affluent or it gets phased out.

Joe Cyax
1 month ago

I have been examining this issue and running the numbers as best I can for several years. I came to the conclusion that Roth conversions were almost always the best course of action for my wife and I, for all the reasons stated in your linked articles.

So much so that we have even decided to delay medicare for at least 2 years and take the penalty in increased medicare costs for life. But by doing so, I think we can substantially reduce our IRMAA penalties starting at my RMD age of 75.

The conversions have also pushed us into higher tax brackets (2 brackets higher) for the time being, but when I looked at projected investment earnings (even being conservative with equity returns) the numbers still point to doing the conversions.

Also, I think the death of a spouse is also underappreciated by many in the sense that the survivor gets hit with a higher tax bracket and basically the same combined RMDs.

While it seems a bit counter-intuitive to hand over so money in taxes now to the IRS and my state, when I look at the “tax drag” (a term I first heard Mike Piper use in one of the Boglehead event videos) on all taxable and tax-deferred accounts, I think “Rothing” is the superior course of action when looking at the whole financial situation 10 years out or more.

Randy Dobkin
1 month ago

There’s even more opportunity for those 65 and over due to the $6,000 bonus deduction per person. If you’re in the 12% marginal rate and get into the phaseout for the bonus because that would add an extra 6% (12% for joint filers both 65 or over) to the marginal rate to make it 12.72% (13.44% MFJ).

Last edited 1 month ago by Randy Dobkin
baldscreen
1 month ago

Thank you, John, for the links. I will check them out. Chris

Scott Dichter
1 month ago

I’ve planned on conversions because of the widow’s tax. I guess I’m someone that would rather lock some taxation in and not be potentially exposed on the tail end.

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