Roth Conversions 2026: Brackets, IRMAA Cliffs, and the RMD-First Rule

• You must take your full required minimum distribution before doing any Roth conversion in 2026—RMDs cannot be converted, only amounts above that minimum can be.
• The 22% federal bracket tops out at $103,350 single/$206,700 married—shifting funds up to that ceiling is the sweet spot for most retirees.
• IRMAA looks back 2 years: a large 2026 transfer to the sheltered side can raise 2028 Medicare premiums by $74–$407 per month per person.
• There is no income limit on these status switches—only on direct Roth IRA contributions. Anyone can convert regardless of income.

The RMD-First Rule: You Cannot Convert Your RMD

The IRS requires that any Required Minimum Distribution be taken before any pre-tax-to-Roth transfer can occur in the same year. This is not optional and not a planning choice—it is a sequential legal requirement. These mandatory amounts cannot be rolled over to another IRA and cannot be moved to the sheltered side; they must be distributed as ordinary taxable income and cannot be recaptured. Only amounts above the minimum are eligible for the switch. For a retiree with a $1.2 million IRA at age 76, the required payout might be $53,000—that entire amount must come out first before a single additional dollar can go into a pre-tax-to-Roth conversion.

The mandatory-first rule creates a particular trap in the first year these distributions are required, which is currently age 73 under the SECURE 2.0 Act. The IRS allows a one-time deferral of the first-year required amount to April 1 of the following year. This deferral option looks appealing—delay income, delay the levy—but it creates a double-stack problem: if you defer your age-73 payout to April 1 of the year you turn 74, you must also take your age-74 amount by December 31 of that same year. Two full distributions hit your taxable return in a single calendar year, potentially pushing you into a higher bracket and triggering Medicare surcharges that would not have occurred with ordinary annual distributions.

2026 Federal Tax Brackets: Where to Stop Your Roth Conversion

The right stopping point for a pre-tax-to-Roth shift depends on your current bracket, your projected future receipts from Social Security and mandatory distributions, and what you expect tax rates to look like in years ahead. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made the 2017 Tax Cuts and Jobs Act rates permanent—the scheduled 2026 sunset did not happen. The rate-increase argument that drove aggressive 2024–2025 transfer strategies no longer applies. These switches still make sense for many retirees in 2026, but the driver is now personal bracket management—specifically avoiding the mandatory-payout-plus-benefit stack that hits at 73—not a race against expiring rates.

Most retirees target shifting funds up to the top of the 22% or 24% bracket. Moving into 32%+ usually only makes sense if you expect significantly higher future rates or want to reduce estate exposure.

IRMAA Cliffs: How a Roth Conversion Can Raise Your Medicare Bill

Medicare’s income-related surcharge uses Modified Adjusted Gross Income from two years prior to determine your premium tier. A pre-tax-to-Roth shift in 2026 will affect your 2028 Medicare bills—and the effect is not graduated. The IRMAA system uses hard thresholds: crossing from one tier to the next by a single dollar triggers the full surcharge for that tier, not a proportional amount. This cliff structure means that a transfer of $5,000 beyond a threshold can cost several thousand dollars in extra premiums over the following year—wiping out much or all of the status benefit for that portion of dollars.

For a married couple, the IRMAA thresholds are exactly double the single thresholds, which makes the math symmetrical but the stakes twice as high on a per-household basis. The two-year lookback also means the damage from a carelessly large transfer is not visible until Medicare bills arrive two years later. By then, the income year cannot be undone, and there is no retroactive correction available except filing a Life-Changing Event (LCE) appeal if income changed due to a qualifying event like retirement or death of a spouse.

The Five-Year Rule for Roth Conversions

Each pre-tax-to-Roth transfer creates its own five-year holding period for penalty-free access to the earnings on that shifted amount. The clock starts on January 1 of the year in which the transfer is made—so a switch done in October 2026 starts its five-year clock on January 1, 2026 and matures on January 1, 2031. This matters primarily for retirees under age 59½ who might need to access those funds; earnings accessed before the five-year clock expires are subject to a 10% early withdrawal penalty, even if the account is a Roth IRA. Importantly, the basis itself—the contributed amount you originally moved—is always accessible without penalty at any time, because that levy was already paid.

After age 59½, the five-year rule changes significantly. Once you are past 59½ and at least one Roth IRA has been open for five or more years, all Roth IRA earnings become accessible levy- and penalty-free, regardless of when individual transfers occurred. This means retirees who opened any Roth IRA at least five years ago—even with a small original contribution—have effectively cleared the five-year hurdle for all future switches once they pass 59½. For most people planning these moves in their 60s and 70s, the five-year rule is largely a bookkeeping concern rather than a practical barrier.

State Taxes on Roth Conversions

Pre-tax-to-Roth transfers are treated as ordinary income by most states, meaning they sit on top of your federal return and are levied at your state’s marginal rate in the year of the switch. States with high rates—California (up to 13.3%), New York (up to 10.9%), New Jersey (up to 10.75%), and others—add a substantial layer on top of federal rates that can change the math entirely. A transfer that looks efficient at a blended 22% federal rate becomes significantly less attractive when state levies push the effective rate above 30%.

Some states treat retirement income differently. Illinois, Pennsylvania, and Mississippi exclude most or all retirement income from state levy, which effectively lowers the cost of these moves in those states. Several states have no income tax at all—Texas, Florida, Nevada, Wyoming, Washington, South Dakota, and Alaska—making this purely a federal calculation there. If you are considering a geographic move in retirement, the interaction between state income levies and this status-switch strategy is worth modeling explicitly before relocating: a move from California to Nevada before a large series of switches can be worth hundreds of thousands of dollars over a retirement.

The Pro-Rata Rule: The Trap for Backdoor Roth Conversions

The pro-rata rule is the IRS mechanism that prevents taxpayers from selectively moving after-tax IRA basis while leaving pre-tax IRA money in place. If you have any pre-tax money in any traditional IRA—including SEP-IRAs, SIMPLE IRAs, and rollover IRAs from old 401(k)s—the IRS treats all IRA balances as a single pool when calculating the taxable portion of any switch. You cannot choose which dollars to move; the ratio of pre-tax to after-tax money applies to every transfer proportionally. A retiree with $900,000 in pre-tax IRA money and $100,000 in after-tax contributions cannot shift just the $100,000 in basis tax-free—90% of every move will be taxable regardless of intent.

The pro-rata rule does not apply to 401(k) in-plan transfers or to the mega backdoor strategy executed inside a 401(k) that allows after-tax contributions. The cleanest solution for retirees caught by the pro-rata rule is to roll pre-tax IRA balances into a current employer’s 401(k) if the account accepts rollovers—this removes the pre-tax IRA money from the pro-rata calculation entirely and allows after-tax IRA basis to be moved without further levy. Not all 401(k) plans accept incoming rollovers, so this requires confirming terms before attempting the strategy.

When Roth Conversions Don’t Make Sense

The case for switching weakens or disappears in several specific situations. If you are already in the 32% bracket or above and expect your burden to be substantially lower in future years—because your Social Security will be modest, your mandatory distributions will be small due to a smaller account balance, or you expect to move to a low-tax state—you may be moving funds at a higher rate than you will eventually pay on normal distributions. Similarly, if you need to access the shifted funds within five years and are under age 59½, the earnings remain subject to the 10% early withdrawal penalty, reducing the benefit of the strategy.

Crossing an IRMAA threshold without a sufficient long-term offset is another scenario where these moves do more harm than good. If a $5,000 transfer beyond a threshold triggers $888 in additional Medicare premiums per year (a married couple each paying $74/month in the first IRMAA tier), the break-even on that marginal move may not occur for decades. Finally, if your heirs have high incomes and will pay the same or similar rates on an inherited traditional IRA as you would pay on a pre-tax-to-Roth switch now, the move provides no benefit to the overall family estate—it only accelerates the payment without reducing the total amount owed.

Action Checklist

1. Take your full required minimum distribution before starting any pre-tax-to-Roth transfer — confirm the amount with your benefits administrator each January.
2. Calculate your current taxable income and find the ceiling of your target bracket — that is your maximum eligible amount for the switch.
3. Check IRMAA thresholds for 2 years out — if moving funds in 2026, check 2028 premium tiers and stay $1,000–$2,000 below the next level.
4. Draw from oldest pre-tax IRAs or 401(k) first — this reduces accounts that will generate mandatory distributions at 73.
5. Pay the resulting levy from a taxable brokerage account, not from the IRA — using IRA funds reduces the shifted amount and the compounding benefit.
6. Document each move on Form 8606 and keep records of each year’s transfer amount and levy paid.
7. Review the transfer amount annually — the right figure changes as markets move, income changes, and thresholds adjust for inflation.