When you're thinking about a Roth conversion, the real question usually is not whether paying taxes today can ever make sense. It's whether doing it now fits the rest of the retirement picture you are building. Moving money from a traditional, pre-tax account into a Roth account may look simple on paper, but tax rules, Medicare premiums, and workplace-plan details can all matter at the same time. Whether we're sitting down with you here in the Lake Norman area or meeting with you virtually, the question is usually the same: how could a Roth conversion fit into the bigger retirement picture you're trying to protect? Before you act, take a look at the moving parts first. These six questions can help you organize that conversation.
1. What Are Your Known Sources of Taxable Income for 2026?
Before considering any voluntary addition to your taxable income, you must account for the income that is already locked in for the year. This baseline typically includes wages from ongoing work, consulting income, interest from savings, dividends from taxable brokerage accounts, and realized capital gains. Furthermore, if you or your spouse have begun taking required minimum distributions from traditional IRAs or workplace retirement plans, or are drawing from an inherited IRA for example, those mandatory withdrawals count as ordinary income. When you add a conversion to your tax return, that amount stacks directly on top of your existing ordinary income. If you do not map out your baseline first, a conversion can easily push you into a higher federal tax bracket than you anticipated.
For married couples filing jointly in 2026, the federal tax brackets span several tiers, starting at 10 percent for taxable income up to $24,800, moving through the 12 percent bracket up to $100,800, the 22 percent bracket up to $211,400, the 24 percent bracket up to $403,550, the 32 percent bracket up to $512,450, and the 35 percent bracket up to $768,700 [^1]. Your conversion sits on top of your other income, meaning every dollar you convert is taxed at your marginal rate. Factoring in the standard deduction of $32,200 for married filing jointly in 2026 helps clarify your net taxable picture, but only if you have a complete inventory of your income sources [^1].
2. How Will the Conversion Impact Your Medicare Premiums Down the Road?
Many pre-retirees focus exclusively on income taxes while overlooking the secondary effect that higher income can have on healthcare costs. Under the rules governing Medicare, the government looks back at your historical tax returns to determine if you must pay an income-related monthly adjustment amount, commonly known as IRMAA. This surcharge increases the cost of both Medicare Part B and Part D coverage. The Social Security Administration typically uses tax data from two years prior to determine these adjustments [^3].
This means that any income generated on your 2026 tax return, including a Roth conversion, may be relevant to a Medicare premium determination two years later, depending on then-applicable rules and the full income picture. For 2026, the standard Part B premium is $202.90 monthly, but higher-income brackets for joint filers begin when modified adjusted gross income exceeds $218,000 [^4]. If a conversion pushes your income across these thresholds, you'll see higher healthcare premiums in the future, a cost that must be weighed against the long-term benefit of tax-free growth.
3. Does Your Workplace Plan Actually Permit the Move?
Not all retirement accounts are structured the same way, and the mechanics of where your money currently sits matter immensely. If your pre-tax funds reside inside a current employer's 401(k), 403(b), or governmental 457(b) plan, you might be looking at an in-plan Roth rollover rather than a traditional IRA conversion [^6], [^7]. However, federal regulations don't force employers to offer designated Roth accounts or in-plan rollover provisions [^6].
Each plan establishes its own rules regarding whether these internal transfers are allowed, what types of contribution sources are eligible, and how frequently you can execute them [^6]. Before making any assumptions, you must review your specific plan document or speak with your plan administrator to verify what provisions are available to you [^6]. If a workplace plan doesn't permit an internal rollover, confirm whether it permits an eligible distribution or another plan-specific route before making any assumption.
4. Are You Prepared for the Permanent Finality of the Decision?
One of the most critical rules governing modern retirement accounts involves the permanence of your actions. Under current tax law, any conversion made on or after January 1, 2018, cannot be undone [^2]. In the past, taxpayers had the ability to reverse a conversion through a process called recharacterization if the market value of the converted assets dropped or if they realized the tax bill was too high. That flexibility no longer exists.
Once you move untaxed traditional amounts into a Roth account, that choice is final [^2]. The converted amount is treated as taxable income on Form 8606 for that tax year [^2], and you must pay the resulting tax obligation. Because you can't press an undo button later, documenting the tax and cash-flow implications before executing any transfer is an important planning step.
5. Where Will the Money for the Tax Bill Come From?
When you convert traditional retirement assets, the converted amount is added to your taxable income for the year [^2]. This creates a separate financial obligation: paying the income tax generated by the transfer. Deciding where those tax dollars will come from requires careful thought.
If you choose to withhold tax directly from the converted retirement account, a portion of your funds is sent to the IRS instead of landing in your new Roth account. While this avoids writing an out-of-pocket check, it reduces the principal amount growing tax-free for your future. Alternatively, paying the tax bill using outside taxable brokerage or cash savings leaves the full balance intact inside the Roth environment, allowing it to compound untouched. Whichever route you choose, coordinating this liquidity need prevents unexpected cash flow crunches when tax season arrives.
6. How Does This Fit Into Your Broader Retirement Timeline?
A Roth conversion should never be viewed as an isolated transaction. It's a tactical tool designed to serve your overarching strategy across time. For instance, you must consider the timeline leading up to age 73, which is when required minimum distributions generally begin for traditional IRAs and many workplace plans [^5]. Because required distributions force taxable income out of your accounts whether you need the money or not, the years leading up to age 73 can be a useful time to evaluate whether a conversion fits the broader plan.
At the same time, remember that unlike traditional accounts, Roth IRAs and designated Roth accounts do not impose lifetime required minimum distributions on the original owner [^5], meaning those accounts may be evaluated within an income and legacy plan, subject to investment performance and applicable tax law. Evaluating how a conversion could alter income across multiple decades helps you decide whether the current tax cost fits your long-term priorities.
What to Do Next
Coordinating a conversion requires looking past generic calculators and examining the moving parts of your specific financial life. Because every household has a unique mix of income sources, tax brackets, and plan rules, taking a personalized approach is vital. Work with a financial advisor who operates under a fiduciary standard. At Two Waters, we work under a fiduciary standard, helping you evaluate these complex intersections so your choices align with your long-term goals.
The Bottom Line
A Roth conversion is one possible element in a comprehensive tax discussion, but it requires coordination around existing income, Medicare thresholds, and plan constraints. Answering these six questions can help you prepare for a more informed conversation before taking action.
References
1. Internal Revenue Service. 2026 tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill 2. Internal Revenue Service. Retirement plans FAQs regarding IRAs. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras 3. Social Security Administration. Medicare annual verification notices FAQ. https://www.ssa.gov/pubs/EN-05-10507.pdf 4. Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B premiums and deductibles. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles 5. Internal Revenue Service. Retirement plan and IRA required minimum distributions FAQs. https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs 6. Internal Revenue Service. Deadline extended to add new in-plan Roth rollover provisions. https://www.irs.gov/retirement-plans/deadline-extended-to-add-new-in-plan-roth-rollover-provisions 7. Internal Revenue Service. Retirement plans FAQs on designated Roth accounts. https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts