Retirement savers converted traditional IRA and 401(k) balances into Roth accounts at a sharply higher rate in the first three months of 2026, driven by a tax code that now locks in lower marginal rates instead of letting them expire. Roth conversion transactions jumped 41% year over year in Q1 2026, according to Fidelity Investments’ quarterly retirement analysis released May 28. The spike came after Congress made the individual income tax brackets from the 2017 Tax Cuts and Jobs Act permanent through the One, Big, Beautiful Bill Act, removing the sunset that had been set for the end of 2025.
Why the 41% conversion surge happened in early 2026
For years, financial planners warned clients that the TCJA’s individual rate cuts would vanish after December 2025 unless Congress acted. A research brief from the Congressional Research Service cataloged those expiring provisions, and the threat of higher brackets pushed a steady stream of Roth conversions through 2024 and 2025. When the OBBBA passed and amended Internal Revenue Code Section 1(j) to make the rate tables permanent, the calculus shifted. Savers who had been on the fence gained a concrete reason to act: the brackets they knew were no longer temporary, and the IRS quickly published inflation-adjusted thresholds confirming a top marginal rate of 37% for tax year 2026.
The result was not a last-minute scramble before a deadline but a first-quarter rush once the rules were settled. Fidelity’s data showed the 41% increase even as overall 401(k) and 403(b) savings rates hit record levels, suggesting that participants were not simply reshuffling existing contributions. Instead, they were deliberately moving pretax dollars into Roth accounts to pay taxes now at known rates rather than gamble on future legislation, future Congresses, or future deficits.
Advisers say that psychological clarity matters. When rates are scheduled to rise, some savers delay action in hopes that Congress will extend the cuts. By contrast, when lower brackets are written into law as permanent, the decision becomes a trade-off between today’s certain bill and an unknowable future. For higher earners already in the 37% bracket, the permanence of that top rate has encouraged “tax diversification” strategies that layer Roth conversions on top of traditional savings rather than replacing them.
Fidelity’s Q1 data and the IRS rate schedule behind the numbers
Fidelity is the largest 401(k) record-keeper in the United States, and its Q1 2026 analysis provides a broad snapshot of conversion behavior across millions of workplace accounts. The 41% year-over-year increase in Roth conversion transactions stands out against a backdrop of economic uncertainty that might otherwise discourage voluntary taxable events. At the same time, record savings rates in both 401(k) and 403(b) plans suggest that participants are not pulling back on deferrals to fund conversions; they are doing both, effectively increasing their overall commitment to retirement.
On the government side, IRS guidance published in Internal Revenue Bulletin 2025-45 spelled out the statutory changes under the OBBBA, confirming that the rate tables previously scheduled to expire were now permanent components of the Internal Revenue Code. The agency’s separate newsroom release on 2026 inflation adjustments detailed updated income thresholds for each bracket, aligning the permanent 37% top rate with higher nominal income levels to reflect cost-of-living increases. Together, those documents gave taxpayers and planners a clear framework for modeling the cost of converting traditional balances into Roth accounts in 2026 and beyond.
That clarity helps explain why conversions rose even as markets remained volatile. When investors can see the exact marginal rate that will apply to an additional dollar of income, they can slice conversions across multiple years, intentionally “filling up” a given bracket without spilling into the next one. Fidelity’s report indicates that many participants are using that kind of bracket management, executing partial conversions rather than all-or-nothing moves.
What the Roth conversion wave means for savers
For individual savers, the surge underscores how sensitive retirement behavior is to tax policy design. The permanence of current brackets reduces the fear of an imminent hike, but it does not eliminate the long-term risk that future lawmakers could raise rates to address deficits or new spending. That lingering uncertainty is one reason advisers continue to favor a mix of traditional and Roth assets, so retirees can draw from whichever bucket is more tax-efficient under whatever rules exist decades from now.
For now, the data show that many Americans are willing to pay a known tax cost in 2026 to secure tax-free withdrawals later. If Congress leaves the OBBBA framework intact, planners expect Roth conversions to remain a steady part of retirement strategies rather than a one-time rush, with Q1 2026 marking the moment when policy clarity translated into measurable action.
