What if one of the most important tax decisions in retirement isn’t how much you withdraw from your savings, but when you decide to pay taxes on them?

For many investors approaching retirement, Roth conversions remain an important planning strategy. Converting assets from a traditional IRA or 401(k) into a Roth IRA means paying taxes today in exchange for potentially tax-free withdrawals later. When done thoughtfully, this approach can improve tax flexibility in retirement and support long-term wealth transfer goals.

Despite periodic headlines suggesting otherwise, Roth conversions are still allowed in 2026. Investors can convert funds from traditional retirement accounts to Roth IRAs regardless of income level. What matters most is how the conversion affects your overall tax picture in a given year. The value of a Roth conversion depends largely on timing, tax brackets, and how the move fits into a broader retirement strategy.

Why Roth Conversions Still Matter

Traditional retirement accounts offer tax deferral, but withdrawals are generally taxed as ordinary income. Roth accounts operate differently. Once taxes are paid on the converted amount, qualified withdrawals can occur tax-free.

That difference can influence retirement planning in several ways. Conversions can help investors diversify the tax treatment of their assets, potentially reduce future tax exposure, and provide greater flexibility when managing withdrawals later in life. In some cases, they may also help heirs inherit retirement assets with fewer tax complications.

Roth conversions remain a common planning strategy precisely because they allow investors to control the timing of taxes rather than leaving that decision to future required withdrawals.

The Role of Required Minimum Distributions

Required Minimum Distributions (RMDs) are often a key factor in Roth conversion planning. Beginning at age 73, individuals must start withdrawing a portion of their tax-deferred retirement savings each year. Those withdrawals are taxable and can gradually push retirees into higher tax brackets as account balances grow. The IRS outlines these rules in its guidance on Required Minimum Distributions.

One strategy some investors consider is converting portions of traditional retirement assets to a Roth IRA before RMDs begin. This can spread taxes over several years rather than concentrating them later when withdrawals become mandatory.

It’s important to note, however, that Roth conversions do not count toward satisfying RMD requirements once those withdrawals begin.

Factors to Evaluate Before Converting

While Roth conversions can be beneficial in the right circumstances, they are not universally appropriate. Because the converted amount is treated as taxable income in the year of the conversion, the decision should be evaluated carefully within a broader financial plan.

Several factors may influence whether a conversion makes sense. Current and future tax brackets are often the most important consideration. A large conversion could push income into a higher tax bracket or affect Medicare premium thresholds tied to income levels. Estate planning goals may also play a role, particularly for families thinking about how retirement assets will be transferred to heirs.

For many investors, Roth conversions work best when approached gradually. Converting smaller amounts over several years may help maintain tax efficiency while building a more flexible retirement income strategy.

Updated 2026 Tax Thresholds

• Tax Brackets: The top marginal rate remains 37% for income over $640,600 (single) or $768,700 (joint).
  
• Standard Deduction: This has increased to $16,100 for single filers and $32,200 for married couples filing jointly.
  
• New Senior Deduction: For those age 65 and older, a new $6,000 per person deduction is available in 2026. This is a crucial consideration for your readers as it can create more “tax-free” space for a Roth conversion.

Key Planning Factors to Emphasize

• The “Stealth Tax” (SALT Phaseout): Starting in 2026, the State and Local Tax (SALT) deduction cap of $40,000 begins to phase out for high earners (starting at $500,000 MAGI). A large Roth conversion that pushes income above this threshold could trigger an effective tax rate much higher than your base bracket.
  
• Mandatory Roth Catch-ups: Beginning January 1, 2026, high-wage earners (those earning over $150,000) are required to make their 401(k) catch-up contributions on an after-tax Roth basis.
  
• TSP In-Plan Conversions: For federal employees, Roth in-plan conversions for the Thrift Savings Plan (TSP) are scheduled to become available in January 2026.
  
• No Recharacterizations: Under current law, Roth conversions cannot be undone (recharacterized).

A Strategic Approach to 2026 and Beyond

Roth conversions continue to be a useful planning tool, but their effectiveness depends on thoughtful coordination with the rest of a financial plan. Taxes, retirement income timing, healthcare costs, and long-term legacy planning all influence whether a conversion strategy makes sense.

At VestGen, we help clients evaluate Roth conversions within the context of their full financial picture, from retirement income planning to estate and tax strategy. If you’re considering whether a Roth conversion could play a role in your long-term plan, speaking with a VestGen advisor can help clarify how it may fit into your overall strategy.