The December 31 deadline trap

A 64-year-old with $1.3 million in traditional retirement accounts has until December 31 to convert funds to a Roth for this tax year. Miss that date and the conversion counts as next year's income instead.

“conversions have to be made by December 31st of the year you are converting”

Why $78,000 is the magic number

For a married couple with $55,000 in other 2026 income, converting $78,000 fills the remaining room in the 12% tax bracket before the 22% bracket kicks in. Converting more means paying nearly double the tax rate on excess dollars.

“Push the conversion to $100,000 and the last $22,000 gets taxed at nearly double the rate.”

How conversions trigger tax brackets

Roth conversions are taxed as ordinary income stacked on top of your other earnings. For 2026, the 12% bracket runs to $100,800 of taxable income for married couples filing jointly before jumping to 22%.

“Every dollar you move from the traditional side gets stacked on top of your other 2026 income and taxed at your marginal rate.”

The annual strategy beats lump sum

Converting $78,000 annually for nine years before required minimum distributions start at age 73 is better than one large $200,000 conversion. Smaller conversions avoid higher tax rates and Medicare income-related monthly adjustment surcharges.

“For most 64-year-olds in this bracket, the lump-sum approach is inferior. The annual, bracket-filling approach wins.”

Medicare surcharges and Social Security impact

A large conversion increases your adjusted gross income, which can trigger Medicare IRMAA surcharges two years later and increase the taxable portion of Social Security benefits. Smaller annual conversions keep income under these thresholds.

Pay the tax from outside money

Use a taxable brokerage account to pay the conversion tax rather than withholding from the IRA itself. Withholding shrinks the amount reaching the Roth, while outside dollars let the full $78,000 compound tax-free.

“Pay the tax from a taxable brokerage account rather than withholding from the IRA itself.”

Your action plan this week

Estimate your year-to-date income, add the $78,000 conversion, and confirm total taxable income stays below $100,800. Call your custodian by early December to initiate the transfer and avoid year-end processing delays.

“Then call your custodian and initiate the transfer by early December to beat custodian bottlenecks.”

SECURE 2.0 gives you nine years

Under SECURE 2.0, required minimum distributions start at age 73, giving a 64-year-old nine years to execute this bracket-filling strategy annually before the IRS forces distributions on its own schedule.

“Under SECURE 2.0, RMDs start at age 73 for you, giving you nine years of runway to do this same maneuver annually.”