Roth Conversion Strategy for High-Net-Worth Investors

At $5M–$50M of investable assets, you likely have a substantial traditional IRA or 401(k) — possibly $500K to $3M or more. Starting at age 73 or 75, the IRS forces distributions from that account whether you need the income or not. Roth conversions let you move on your schedule, at rates you choose, before that forced-distribution clock starts. At this wealth level, the math often favors conversion — but the IRMAA cost and state tax picture require modeling before acting.

The RMD problem at $5M+

Required Minimum Distributions (RMDs) start at age 73 for those born 1951–1959, and age 75 for those born 1960 or later (SECURE 2.0, § 107).¹ The IRS Uniform Lifetime Table divides your traditional IRA balance by a factor based on your age. At 73, that factor is 26.5. At 75, it's 24.6.⁵

What that means in dollar terms:

• $1M IRA at age 73: $37,736 first-year RMD — on top of Social Security, dividends, and other income.
• $2M IRA at age 75: $81,301 first-year RMD, growing each year as the divisor shrinks.
• $3M IRA at age 75: $121,951 first-year RMD — likely pushing a married couple into the 32% or 35% bracket on that income alone.

The issue: you don't get to choose the timing. The balance grows tax-deferred, which sounds beneficial, but the IRS's future cut grows with it — at rates you can't predict. RMDs also increase Medicare premiums (IRMAA) and can push Social Security into higher taxable territory. Roth conversions let you pay tax at today's rates, on an amount you control, and eliminate the forced-distribution obligation permanently for that balance.

Fill-the-bracket strategy: the core math

Most HNW investors aren't trying to convert the entire IRA in one year — the tax cost would be enormous. The goal is systematic conversion each year up to the ceiling of a target bracket, spreading the tax cost over a decade or more of low-income retirement years before RMDs begin.

2026 federal income tax brackets — Married Filing Jointly:²

• 22% bracket: taxable income $100,801 – $211,400
• 24% bracket: taxable income $211,401 – $403,550
• 32% bracket: taxable income $403,551 – $512,450
• 35% bracket: taxable income $512,451 – $768,700
• 37% bracket: taxable income $768,701+

Standard deduction (MFJ, 2026): $32,200. Single: $16,100.²

Example: A retired couple receives $180,000 in ordinary income (Social Security partial inclusion, dividends, interest). After the $32,200 standard deduction, taxable income is roughly $147,800 — solidly in the 22% bracket. The top of the 24% bracket is $403,550. Conversion headroom: $403,550 − $147,800 = $255,750. They can convert up to $255,750 this year at a 24% marginal rate.

IRMAA: the hidden conversion cost

Every dollar converted from a traditional IRA adds to your Modified Adjusted Gross Income (MAGI) for the year. MAGI determines your Medicare Part B and Part D premiums through the Income-Related Monthly Adjustment Amount (IRMAA) — and this cost surprises many high earners who haven't modeled their Roth conversion carefully.

2026 IRMAA brackets — Married Filing Jointly (based on 2024 MAGI):³

Critical details:

• Two-year lookback. Your 2026 IRMAA is based on your 2024 MAGI. A large Roth conversion in 2026 shows up in 2028 Medicare premiums — not immediately. This creates planning flexibility but also a future liability to track.
• Cliff structure. Being $1 over a tier threshold triggers the full surcharge for both Parts B and D for the entire year. The jump from $409,999 to $410,001 (MFJ) costs an extra ~$2,921/year for a couple — just from crossing that line.
• Per-enrollee cost. Both spouses on Medicare pay the surcharge. The "annual cost" column above reflects both enrollees.
• Appeals available. If income dropped significantly due to retirement, divorce, or death of a spouse, SSA Form SSA-44 lets you appeal and use a more recent year's income to avoid the lookback surcharge.

State tax arbitrage: timing conversions around a state move

Nine states have no income tax on wages or investment income: Alaska, Florida, Nevada, New Hampshire (investment income only), South Dakota, Tennessee, Texas, Washington, and Wyoming. Pennsylvania and Illinois exempt all retirement income — including Roth conversions in some cases.

If you're in California (13.3% top rate), New York (10.9%), or New Jersey (10.75%) and planning to relocate in retirement, the conversion timing matters substantially:

• High-tax state + peak earnings = worst time to convert. Converting at 37% federal + 13.3% California means a $300K conversion costs $152K in combined tax. The same conversion in a Florida retirement costs $300K × 32% = $96K in federal tax alone.
• Post-retirement, pre-RMD window in a no-tax state is typically the optimal window. Lower ordinary income + no state income tax on conversions = lowest blended rate.
• Watch domicile rules. California and New York aggressively audit departing high-income residents. A large Roth conversion in a transition year may be attributed partly to your prior-state income if domicile isn't clearly established. Consult a tax attorney before converting in the year you move.

Protecting your heirs: why Roth matters for the 10-year rule

The SECURE Act (2019) eliminated the "stretch IRA" for most non-spouse beneficiaries. Inheritors now face a mandatory 10-year distribution window. Under T.D. 10001 (IRS final rules, July 2024), non-spouse beneficiaries who inherit from an account owner who had already begun required minimum distributions must:⁴

• Take annual RMDs in years 1 through 9 of the 10-year window, AND
• Empty the account completely by the end of year 10.

In practice: a 45-year-old who inherits a $2M traditional IRA from a parent who had already started RMDs will be forced to take roughly $200K+/year for a decade, entirely on top of their own salary — likely at 32%–37% federal rates. The 10-year forced-out on a $2M balance at 37% generates approximately $740K in federal income tax.

A Roth IRA changes this picture entirely. Inherited Roth IRAs still have the 10-year rule, but the distributions are income-tax-free. Your heirs can choose when within the 10-year window to take them, at zero federal income tax, regardless of their bracket.

Roth conversion optimizer

Enter your situation to see your fill-the-bracket headroom, estimated federal tax on conversion, and whether the conversion will push your MAGI into an IRMAA tier.

When Roth conversion doesn't make sense

Conversion is beneficial when the rate you pay today is lower than the rate your future RMDs (or heirs) will face. That isn't always the case.

• You're still in peak earning years. Converting at 37% while working, expecting 24% in retirement, means you're paying more now — not less. The case for conversion strengthens once earned income drops significantly.
• The IRA will go to charity. Qualified charities pay zero income tax on inherited traditional IRA distributions. Roth conversion provides no benefit when the entire IRA is earmarked for a charitable bequest or donor-advised fund.
• You have a large charitable deduction offsetting this year's income. A major donor-advised fund contribution can reduce your effective rate on conversions in the same year — but waiting until that deduction year to convert can be an even better move.
• You're moving to a no-tax state in the next 12–18 months. Deferring the conversion until after establishing Florida or Texas domicile saves 8–13% on the state side. Usually worth the wait.
• IRMAA erosion reduces the net benefit. For couples with base MAGI near $274K or $342K, any meaningful conversion may jump 2–3 IRMAA tiers, adding $5K–$8K/year in ongoing Medicare costs. Model this explicitly. The calculator above does the sensitivity check automatically.

What a systematic conversion program looks like

A multi-year Roth conversion program for an HNW household typically spans 10–15 years and involves:

1. Baseline income projection. Your CPA models ordinary income for the next 10+ years — Social Security timing, dividends, capital gains, RMD start dates, potential business exits or asset sales — to map the low-rate window.
2. Annual conversion sizing. For each year, determine the bracket ceiling to target and whether an IRMAA cliff creates a binding constraint. In most cases, stopping just below an IRMAA threshold captures more value than the additional conversion earns at the margin.
3. Fund the conversion tax from taxable accounts. Paying the conversion tax with taxable account assets — not IRA assets — preserves more dollars in the Roth. Paying from the IRA reduces the effective amount converted.
4. Update asset location. After conversion, the Roth account should hold highest-expected-growth assets: small-cap equity, emerging markets, private equity if accessible. The tax-free, RMD-free nature of the Roth makes it the most powerful compounding vehicle in the portfolio.
5. Coordinate with the estate plan. Update beneficiary designations. If heirs are the primary IRA beneficiary, review whether the Roth changes the optimal trust structure. Coordinate with your estate attorney — the 10-year rule math shifts materially once the IRA becomes a Roth.

1. IRS — SECURE 2.0 RMD and Account Changes. § 107: RMD age 73 for those born 1951–1959; age 75 for those born 1960 or later. § 325: Roth 401(k) and Roth TSP no longer subject to lifetime RMDs starting 2024.
2. Tax Foundation — 2026 Federal Income Tax Brackets (Rev. Proc. 2025-32). MFJ ceilings: 22% = $211,400; 24% = $403,550; 32% = $512,450; 35% = $768,700. Standard deduction MFJ: $32,200; Single: $16,100.
3. Kiplinger — Medicare Premiums 2026: IRMAA Brackets and Surcharges for Parts B and D. Base Part B premium $202.90/mo. Six MFJ tiers from ≤$218,000 (no surcharge) to ≥$750,000 (+$487.00/mo per enrollee). Surcharges based on 2024 MAGI.
4. IRS T.D. 10001 (July 2024) — Inherited IRA Final Rules. Non-spouse beneficiaries subject to the 10-year rule must take annual RMDs in years 1–9 when the decedent had already begun required minimum distributions (was past the required beginning date).
5. IRS Publication 590-B — Distributions from IRAs (Uniform Lifetime Table). RMD divisors: age 72 = 27.4; age 73 = 26.5; age 74 = 25.5; age 75 = 24.6; age 80 = 20.2. 2022 revised table, effective for RMDs beginning 2022.

Tax bracket thresholds reflect 2026 values per Rev. Proc. 2025-32. IRMAA thresholds reflect 2026 Medicare premiums published by CMS (based on 2024 income). ULT divisors from IRS Pub. 590-B 2022 revised table. Values verified April 2026. This page is for informational purposes and does not constitute tax, legal, or financial advice.