Roth Conversion Bracket Filling: How Much to Convert Each Year

Spreading conversions over many years keeps each year's conversion inside a low tax bracket, which can cut the total tax bill roughly in half compared with converting all at once. The method is bracket filling: each year, convert only the amount that fits between your current taxable income and the top of your target bracket.

Why spread Roth conversions over multiple years?

The U.S. tax system is progressive: the more income you have, the higher the rate on the next dollar earned. Converting a large traditional IRA balance all at once creates a single enormous income spike, pushing hundreds of thousands of dollars through the highest brackets. A $500,000 conversion in a single year might face 22%, 24%, 32%, and 35% rates on different portions — with perhaps $150,000 or more owed in federal tax alone.

Spreading that same $500,000 across ten years at $50,000 per year — each year carefully calibrated to stay within the 22% bracket — could cost roughly $60,000 total in federal tax instead. The multi-year approach isn't just slightly better; it can cut the total tax bill by 50–60% over a single large conversion.

What is bracket filling?

The bracket-filling approach works like this: each year, you project your total taxable income (pension, Social Security, dividends, capital gains, interest) and compare it to the top of your target tax bracket. The gap between your current income and that ceiling is your conversion budget for the year.

What is a Roth conversion ladder?

A Roth conversion ladder is a variation of the multi-year approach designed for retirees who need access to Roth funds before age 59½. Because each conversion starts a new five-year clock before the converted principal can be accessed penalty-free, a ladder stages conversions to create a stream of maturing, accessible funds year by year.

For example, if you convert $40,000 in Year 1, another $40,000 in Year 2, and so on, the Year 1 conversion becomes fully accessible (penalty-free) in Year 6. By Year 10, you have a steady stream of tax-free principal becoming available each year. This strategy is particularly useful for early retirees who need income between retirement and age 59½ without triggering penalties.

How do you project your future tax rate?

The case for multi-year conversions rests on the assumption that your future marginal rate will be higher than your current rate. To test this, project your income at ages 70, 73, 75, and 80 — accounting for:

• Social Security benefit amount at your planned claiming age
• RMDs from current traditional IRA and 401(k) balances, projected with reasonable growth
• Any pension income
• Expected investment income from taxable accounts

If this projection shows your income rising substantially — as it does for most retirees with significant traditional IRA balances — the case for converting now at lower rates is strong. A Roth conversion calculator or advisor can model this precisely.

Did the TCJA tax rates expire in 2026?

No. The Tax Cuts and Jobs Act of 2017 lowered ordinary income tax rates — the 22% bracket had been 25%, and the 24% bracket had been 28% — and those cuts were scheduled to expire after 2025. Legislation enacted in July 2025 made the rate structure permanent instead. The brackets for 2026 remain 10%, 12%, 22%, 24%, 32%, 35%, and 37%, indexed for inflation each year.

This removes a deadline that drove a great deal of conversion advice written in 2024 and 2025. If you were told to accelerate conversions before rates jumped at the end of 2025, that particular reason no longer applies. The case for converting now rests entirely on your own rate trajectory — the gap between what you would pay today and what you expect to pay once Social Security and RMDs land on top of each other — rather than on a scheduled change in the law.

That personal case is often still strong, and for many retirees it is the stronger argument anyway. A couple whose income roughly doubles at 73 faces a real rate increase regardless of what Congress does. What changed is that the clock is now yours, not the statute's, which means there is less reason to rush a conversion into a year where it collides with IRMAA thresholds or an ACA subsidy cliff.

How often should you revisit the plan?

A multi-year strategy is not a "set it and forget it" plan. Every year brings changes: new tax laws, changing account balances, unexpected income events, health changes, or shifts in Social Security claiming plans. The conversion amount should be recalculated each year based on current-year income projections and updated to reflect any changes in the tax landscape.

Rebalancing inside the Roth IRA itself is also relevant. As the Roth balance grows, the asset allocation should be reviewed to ensure the tax-free bucket is invested for long-term growth — there's no benefit to holding cash or bonds in an account that grows tax-free.

When should you stop converting?

Roth conversions become less attractive when:

• Your marginal conversion rate approaches or exceeds your expected retirement rate
• The conversion would trigger IRMAA surcharges that exceed the tax savings
• The traditional IRA balance has been reduced to the point where future RMDs will be modest
• You need the taxable funds used to pay conversion taxes for other expenses
• Your health outlook has changed and the break-even horizon has shortened

There is no single rule for when to stop — it requires an annual reassessment of the trade-off between current conversion cost and projected future tax savings.