A 66-year-old who left a full-time job in late 2025 and plans to delay Social Security until 70 might report only $30,000 in taxable income this year. That stretch between a final paycheck and the start of required minimum distributions is one of the most valuable windows in retirement tax planning, and it closes on its own. By converting a slice of a traditional IRA to a Roth while income is temporarily low, that retiree pays federal tax at a known, lower rate on money that would otherwise be taxed at a higher rate once RMDs begin. The side benefit is just as important: a smaller traditional IRA balance down the road means smaller RMDs, which means lower Medicare premiums, because the same income figure that sets tax brackets also determines what Medicare charges for Part B and Part D.
Why the 2026 tax landscape makes this urgent
The individual tax rates set by the Tax Cuts and Jobs Act of 2017 expired after December 31, 2025, and Congress did not extend them. That means the pre-2018 bracket structure is back in effect for the 2026 tax year. The old 25% bracket now applies where the TCJA’s 22% bracket used to sit, and the overall rate schedule is less favorable for most filers. The IRS inflation-adjustment announcement for 2026 sets the exact bracket thresholds after indexing for inflation, and those numbers are the starting point for sizing any conversion. The core math is simple: the wider the gap between this year’s low income and a future year’s high-RMD income, the more tax a well-timed conversion can save.
Under 26 CFR 1.408A-4, every dollar converted from a traditional IRA to a Roth counts as gross income in the tax year the money moves. That single rule is what gives the strategy its power: you pick the year, so you pick the rate.
How a partial conversion works in practice
The IRS allows three paths: a trustee-to-trustee transfer, a 60-day rollover, or a same-custodian redesignation. Partial conversions are explicitly permitted under IRS Publication 590-A, so a retiree can move just enough to fill a target bracket rather than converting the entire balance and triggering a far larger tax bill.
Here is what that looks like for a real household. A married couple filing jointly has $40,000 in taxable income from a pension and interest. Under the reverted 2026 brackets, the 25% rate applies to taxable income above roughly $77,400 (after inflation adjustments) for joint filers. The couple could convert enough traditional IRA money to fill the 15% bracket completely and then decide how far into the 25% bracket they are willing to go. If they convert $35,000, they stay entirely in the 15% bracket. If they convert $55,000, about $17,600 of that lands in the 25% bracket. Without any conversion, that money stays in the traditional IRA, grows, and eventually comes out as an RMD taxed at whatever rate applies in that future year, likely a higher one.
One wrinkle catches people off guard: the pro-rata rule. If a taxpayer holds both pre-tax and after-tax (nondeductible) contributions across all traditional, SEP, and SIMPLE IRAs, the IRS treats every distribution or conversion as a proportional mix of taxable and nontaxable money. There is no way to cherry-pick only the after-tax dollars. Publication 590-A and Form 8606 walk through the calculation.
Why every converted dollar shrinks a future RMD
Traditional IRAs force annual withdrawals starting at age 73 for people born between 1951 and 1959, or age 75 for those born in 1960 or later, under the SECURE 2.0 Act. Each year the IRS divides the prior December 31 account balance by a life-expectancy factor from the Uniform Lifetime Table. A $900,000 traditional IRA at age 75 produces an RMD of roughly $36,500, and every dollar of it is taxable.
Roth IRAs carry no lifetime RMD requirement under 26 U.S. Code § 408A. Every dollar moved into a Roth before RMDs begin is a dollar that will never generate a forced taxable withdrawal. Over a decade or more of compounding, that difference can reshape a retiree’s entire income profile in later years.
How IRMAA turns extra income into higher Medicare premiums
Medicare’s income-related monthly adjustment amount (IRMAA) adds surcharges to Part B and Part D premiums for beneficiaries above certain income thresholds. The Social Security Administration sets the surcharge using modified adjusted gross income from the tax return filed two years earlier. A large RMD in 2028, for instance, can raise Medicare premiums in 2030.
The CMS 2026 fact sheet and the SSA premium table publish the exact thresholds. For 2026, a married couple filing jointly pays the standard Part B premium as long as their MAGI stays at or below the first IRMAA tier listed in the CMS fact sheet. Cross that line and the surcharge jumps in steps, reaching hundreds of extra dollars per person per month at the highest tiers. The statutory authority sits in Social Security Act sections 1839 and 1860D-13.
A partial Roth conversion done during a low-income year reduces the traditional IRA balance that will eventually produce those RMDs. Smaller RMDs mean lower MAGI, and lower MAGI can keep a retiree below an IRMAA threshold they would otherwise breach. The savings stack up: lower premiums every year for as long as the retiree stays below the bracket.
The five-year rule and estimated taxes: two details people overlook
Converted Roth dollars come with their own waiting period. Under IRS rules, each conversion starts a separate five-year clock. If a retiree withdraws converted amounts before five years have passed and before age 59½, a 10% early withdrawal penalty can apply to the taxable portion. For most retirees over 59½, the penalty is not an issue, but the five-year rule still matters for ordering purposes when multiple conversions have been made in different years. IRS Publication 590-B details the ordering rules.
There is also a cash-flow consideration that trips people up. A conversion adds to taxable income, and if the retiree has not had enough tax withheld or made estimated payments to cover it, an underpayment penalty can apply. Retirees who convert mid-year should check whether a fourth-quarter estimated payment is needed, using Form 2210 as a guide, to avoid a surprise when they file.
What this strategy cannot control
No amount of bracket-filling eliminates uncertainty. Congress can change tax rates again, and IRMAA thresholds are recalculated annually. A retiree who converts aggressively at 2026 rates could find that future rates drop, making the early tax payment less advantageous than expected. The reverse is also possible, and historically, rates have moved in both directions.
State income taxes add another variable. Nine states impose no tax on individual income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. (New Hampshire’s interest and dividend tax expired on January 1, 2025, and Tennessee’s Hall Tax on investment income expired on January 1, 2021, so both states are now fully free of state income tax.) A retiree who converts in a state that taxes IRA distributions and later moves to a no-tax state may have paid state tax on money that would have escaped it entirely. Conversely, someone in a no-tax state today who converts before moving to a high-tax state locks in a zero state rate on those dollars.
Custodian logistics matter, too. Processing times for trustee-to-trustee transfers vary by firm, and a conversion initiated in late December that settles in January lands in a different tax year. The IRS rules address the legal mechanics but say nothing about brokerage processing windows. Retirees planning a year-end conversion should confirm cutoff dates with their custodian well in advance.
Personal factors sit outside any tax code. A retiree with high medical expenses may need liquid, accessible funds more than future tax savings. Someone planning to leave a large inheritance may value the fact that Roth assets pass to heirs free of income tax under current law. Someone with a shorter life expectancy may never recoup the upfront tax cost. These are judgment calls, not math problems.
How to size a conversion before the low-income window closes
The verified rules are narrow but powerful. Conversions are taxable in the year they occur. Roth IRAs owe no lifetime RMDs. Traditional IRA RMDs inflate MAGI. Higher MAGI can trigger Medicare surcharges two years later. Each of those facts comes from a primary federal source, not a planning opinion.
What sits on top of those rules is timing and personal math. Retirees weighing a partial conversion in 2026 should pull their most recent tax return, estimate this year’s income without a conversion, and then layer in conversion amounts bracket by bracket using the reverted rate schedule. Checking the SSA premium table alongside the tax brackets reveals whether a proposed conversion would also push MAGI past an IRMAA cliff. A few thousand dollars of additional converted income can sometimes trigger thousands in extra Medicare premiums two years out, turning a smart tax move into a net loss.
The low-income window, by definition, does not last. Once Social Security benefits begin, or a pension kicks in, or RMDs start, the baseline income rises and the room to convert at a low rate shrinks. Retirees who recognize the gap while they are standing in it have the clearest shot at locking in a rate they may not see again.
