Roth Conversion or Not? How to Decide in the New Tax Landscape

With the One Big Beautiful Bill Act (OBBBA) signed into law in July 2025, the lower tax brackets we’ve grown used to are now permanent — including the top rate, which held at 37% instead of climbing to 39.6% in 2026 (Tax Foundation, 2026). For high earners who are still in their building years, that changes the calculation in a few meaningful ways.  

So let’s walk through how to think about it. 

First, A Quick Refresher 

A Roth conversion is exactly what it sounds like: you move money from a traditional IRA or 401(k) — where you’ll owe ordinary income tax on every dollar you eventually withdraw — into a Roth account, where the money grows and comes out tax-free in retirement. Think of it like paying tax on the seed instead of the harvest. You pay tax today on the amount you convert, and in exchange, all the future growth escapes taxation entirely. 

One thing a lot of high earners don’t realize is that while you may earn too much to contribute directly to a Roth, there’s no income limit on converting to one (SDO CPA, 2026). That’s exactly why conversions are such a useful tool for higher-income households. The catch, of course, is that you’re voluntarily creating a tax bill right now, and for a high earner, that bill can be steep. So the real question is always: will I pay a lower rate now, or later? 

Why The New Landscape Tilts The Scale 

Here’s where permanence matters. In the old world, you might have rushed to convert before rates went up. Now, with brackets locked in, the decision is less about beating a deadline and more about your own trajectory — and that’s where it gets interesting. 

If we think about three things, the picture comes into focus. 

First, your own future tax rate may be higher than you assume. Many high earners picture retirement as a lower-tax chapter. But if you’re a strong saver, your traditional accounts can balloon and required minimum distributions, stacked on top of Social Security and other income, can push you right back into a high bracket later. Paying 32% now might genuinely beat paying 35% or 37% on a much larger balance decades from now. 

Second, OBBBA quietly trimmed the value of itemized deductions for top earners. Starting in 2026, taxpayers in the 37% bracket face a new limitation that reduces the benefit of their itemized deductions (IRS, 2025). The one thing to consider there is that the deductions you’d normally lean on to soften a high-income year are a little less powerful now, which can make the clean, predictable cost of a Roth conversion comparatively appealing. 

Third, estate goals are clearer than ever. A Roth IRA passes to your heirs income-tax-free, and there’s no required distribution during your lifetime. If part of your plan is leaving a tax-free gift to the next generation, conversions are one of the most elegant ways to do it. 

A Real-Life Example 

Let’s make this concrete. Say you’re 48, married, with taxable income around $250,000 — comfortably in the 24% bracket, which for 2026 runs up to $256,225 for joint filers (IRS, 2025). You’ve got $600,000 in a traditional IRA you don’t plan to touch for decades. You’re disciplined, so that account could realistically grow well past $2 million by the time RMDs begin. 

This is where a “fill-the-bracket” approach shines. Rather than converting a giant lump sum, you convert just enough each year to reach the top of your current bracket without spilling into the next one (College Investor, 2026). In years when your income dips, that headroom grows. Pay tax at today’s known rate on a smaller balance now, and everything that grows afterward comes out tax-free later.  

J.P. Morgan’s Guide to Retirement illustrates this relationship well: the lower your tax rate today relative to your expected rate in retirement, the more a conversion works in your favor, and the wider that gap, the bigger the lifetime payoff. 

The Trade-Offs (Because There Always Are Some) 

I’d never present this as a slam-dunk, because it isn’t one for everyone, especially during peak earning years. When wages, bonuses, and other income are already stacking up, piling a large conversion on top can mean paying tax at your highest marginal rate, which is the opposite of smart planning (Defiant Capital, 2026).  

Here are a few things to consider: Always pay the conversion tax from outside the retirement account — ideally a taxable brokerage account. If you have to dip into the IRA to cover the tax, you lose much of the benefit. A conversion also raises your taxable income for the year, which can ripple into things like Medicare premium surcharges (IRMAA) down the road or the 3.8% net investment income tax. And remember, once you convert, it’s permanent — recharacterizations were eliminated back in 2018 — so accurate income projections really matter. 

This is genuinely a “show me the numbers for my situation” decision. There’s no rule of thumb that replaces modeling it against your actual income, balances, and timeline. 

Your Next Step 

If you’re a high earner with sizable traditional retirement balances, this is worth mapping out, ideally before year-end, when conversion timing matters most. Action is the best remedy to anxiety: you don’t need every answer first, you just need to start the conversation. 

At WHZ Strategic Wealth Advisors, our “Plan Well. Invest Well. Live Well.™” process coordinates tax-smart strategies like Roth conversions with your broader plan, so each piece works together. We’d be glad to help you decide whether a conversion fits — that’s just one way we work to deliver “Absolute Confidence. Unwavering Partnership. For Life.” Schedule a complimentary discovery session or call us at (860) 928-2341. 

Authored by WHZ Vice President & Associate Financial Advisor Holly C. Wanegar, CFP®. AI may have been used in the research and initial drafting of this piece. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084, 860.928.2341. http://www.whzwealth.com.  

RELATED FAQs 

What is a Roth conversion and how does it work? 

A Roth conversion moves money from a traditional IRA or 401(k) into a Roth account. You pay ordinary income tax on the converted amount today, and in exchange, all future growth and qualified withdrawals come out completely tax-free in retirement. It’s essentially choosing to pay tax on the seed rather than the harvest. 

Can high earners do a Roth conversion if they earn too much to contribute to a Roth? 

Yes. Unlike direct Roth IRA contributions, which phase out at higher incomes, Roth conversions have no income limit. You can convert any amount regardless of how much you earn, which is exactly why conversions are a popular strategy for high-net-worth households. 

Did the One Big Beautiful Bill Act (OBBBA) change Roth conversion strategy? 

Yes, indirectly. OBBBA made the lower TCJA tax brackets permanent, keeping the top rate at 37% rather than letting it rise to 39.6%. This removes the “beat the deadline” urgency that drove many conversions and shifts the focus to comparing your current tax rate against your expected rate in retirement. 

What is the “fill-the-bracket” strategy? 

Fill-the-bracket means converting just enough each year to bring your taxable income up to the top of your current tax bracket without crossing into the next higher rate. This lets you move meaningful amounts into a Roth over time while keeping each dollar converted at the lowest possible marginal rate. 

How does OBBBA’s itemized deduction limit affect the decision? 

Beginning in 2026, taxpayers in the 37% bracket face a new limitation that reduces the value of their itemized deductions. Because the deductions high earners typically rely on to offset income are now somewhat less powerful, the predictable, defined cost of a Roth conversion can become comparatively more attractive. 

Should I pay the conversion tax from my IRA? 

No. Financial professionals generally recommend paying the conversion tax from outside funds, such as a taxable brokerage account. Using IRA dollars to cover the tax bill significantly reduces the long-term benefit of the conversion. 

Can a Roth conversion affect my Medicare premiums or other taxes? 

Yes. A conversion raises your modified adjusted gross income for that year, which can trigger Medicare premium surcharges (IRMAA) and may interact with the 3.8% net investment income tax. These secondary thresholds are an important reason to model a conversion’s full impact, not just the income tax. 

Are Roth conversions good for estate planning? 

They can be. Roth IRAs pass to heirs income-tax-free and have no required minimum distributions during the original owner’s lifetime, making them an efficient way to transfer tax-free wealth to the next generation. 

When is the best time to do a Roth conversion? 

Conversions are often most valuable in lower-income years and should be coordinated before year-end, since timing affects your tax bracket for that year. They’re generally least attractive during peak earning years, when added income may be taxed at your highest marginal rate. The right amount and timing depend on your specific income, balances, and retirement horizon.