Why Roth Conversions Are Powerful in 2026
Traditional IRAs/401(k)s grow tax-deferred but tax withdrawals as ordinary income. Roth accounts grow and withdraw tax-free. Conversions bridge the gap by paying taxes upfront. In 2026, with potential TCJA expiration looming (higher brackets post-2025), converting now can lock in lower rates. For mid-40s investors, ladders spread conversions over years to manage brackets and avoid Medicare surcharges.
How a Roth Conversion Ladder Works
Convert portions annually from traditional to Roth IRA. Pay taxes on converted amount in that year. After 5 years (or age 59½), withdrawals are tax/penalty-free. Example: Convert $60k/year for 10 years in 22% bracket → ~$600k tax-free later.
Determining Optimal Amounts
Use "bracket filling": Convert up to top of current bracket without jumping higher.
In 2026:
- 12% bracket (married): ~$94k taxable income.
- 22% bracket: ~$201k.
- Avoid 24%+ if possible.
Factor Medicare IRMAA surcharges (extra premiums if MAGI >$206k married).
Benefits for Midlife Investors
- Tax-free RMDs (no forced distributions at 73).
- Tax-free inheritance for heirs.
- Flexibility: Withdraw contributions anytime penalty-free.
Risks and Mitigations
- Market drop post-conversion: Mitigate with diversified assets.
- Higher future brackets: Model scenarios.
- 5-year rule: Plan early.
Step-by-Step Implementation
- Project future income/tax brackets.
- Model conversions (use tools like MaxiFi or advisor software).
- Convert in low-income years (e.g., job transition).
- Recharacterize if needed (though limited post-2017).
Case Study: 48-Year-Old Executive
Converted $70k/year in 22% bracket. Projected savings: $250k+ in lifetime taxes vs.
traditional path.
Conclusion: Build Your Ladder Now
Roth ladders are a high-impact strategy. PRO-MOTION Consulting designs customized ladders—schedule a call to optimize yours. (Word count: ~1,950)