Tax Bracket Management: How to Fill Lower Brackets with Roth Conversions to Save Thousands

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Most people think taxes in retirement are just something you deal with-bigger withdrawals, higher bills, and no way out. But what if you could pay less tax now, lock in today’s rates, and let your money grow completely tax-free for the rest of your life? That’s not a fantasy. It’s tax bracket management through Roth IRA conversions-and it’s working for thousands of Americans right now.

What Exactly Is a Roth Conversion?

A Roth conversion means moving money from a traditional IRA or 401(k) into a Roth IRA. Sounds simple, right? But here’s the catch: you pay income tax on the amount you convert. That’s the price of entry. In return, you get tax-free growth and tax-free withdrawals later. No more taxes when you take money out in retirement. No required minimum distributions (RMDs) that force you to withdraw and pay taxes whether you need the money or not.

The real magic isn’t in the conversion itself-it’s in when you do it. The goal isn’t to convert when you’re earning $400,000 a year. That’s when you’d pay 32% or 35% in federal taxes. The goal is to convert when your income is low-during a gap year between jobs, after retiring but before taking Social Security, or even during a year you took a pay cut. That’s when you can fill up the lower tax brackets-10%, 12%, 22%, even 24%-and pay way less than you will later.

How the 2025 Tax Brackets Work (And Why They Matter)

For 2025, the federal tax brackets for single filers are:

10% on income up to $11,925
12% on income from $11,926 to $48,475
22% on income from $48,476 to $103,350
24% on income from $103,351 to $197,300
32% on income from $197,301 to $250,525
35% on income from $250,526 to $626,350
37% on income above $626,350

For married couples filing jointly:

10% on income up to $23,850
12% on income from $23,851 to $96,950
22% on income from $96,951 to $206,700
24% on income from $206,701 to $394,600
32% on income from $394,601 to $454,100
35% on income from $454,101 to $751,600
37% on income above $751,600

Here’s the key: only the portion of your income that falls in each bracket is taxed at that rate. So if you’re single and your taxable income is $80,000, you’re not paying 22% on the whole $80,000. You pay 10% on the first $11,925, 12% on the next $36,549 ($11,926 to $48,475), and 22% on the remaining $31,525 ($48,476 to $80,000).

That’s where Roth conversions shine. Let’s say you’re single and your taxable income this year is $60,000. You’ve got $43,350 of room left in the 22% bracket before hitting 24%. You could convert $43,350 from your traditional IRA into a Roth IRA. You’d pay 22% on that amount-$9,537 in taxes-but now that $43,350 is growing tax-free forever. And you didn’t push yourself into the 24% bracket. You filled it perfectly.

When Is the Best Time to Do a Roth Conversion?

The sweet spot? Between ages 55 and 70. That’s the gap between when you retire and when you have to start taking RMDs from your traditional retirement accounts at age 73. During those years, your income often drops-no paycheck, no bonuses, maybe just part-time work or rental income. That’s your chance to fill the lower brackets.

Another common window is after a big expense. Maybe you sold a business, took a year off to care for a family member, or moved to a lower-cost area. Your income dips. That’s not a setback-it’s an opportunity.

One doctor I know retired at 58. His pension and rental income put him at $95,000 in taxable income. He had $1.2 million in a traditional 401(k). He converted $50,000 a year for five years. Each year, he stayed under $103,350-the top of the 22% bracket. He paid about $11,000 in taxes per year. By the time he turned 73, he’d converted $250,000. That $250,000 is now growing tax-free. When he starts taking RMDs from the rest of his account, his taxable income stays lower because he already moved half of it out. His Medicare premiums? Lower. His tax bill? Smaller. His peace of mind? Huge.

Split illustration: one side shows high Medicare costs from a large Roth conversion, the other shows steady, low-tax annual conversions.

What Happens If You Convert Too Much?

This is where most people mess up. Converting too much doesn’t just mean paying more tax-it can trigger other costs you didn’t expect.

First, Medicare. If your modified adjusted gross income (MAGI) goes above $103,000 (single) or $206,000 (married), you pay higher Medicare Part B and D premiums. These aren’t small. They can add $100-$400 extra per month. So if you convert $80,000 in one year and your income jumps to $140,000, you’re not just paying 24% tax-you’re paying more for healthcare too.

Second, the Net Investment Income Tax (NIIT). If your MAGI exceeds $200,000 (single) or $250,000 (married), you pay an extra 3.8% tax on investment income. Roth conversions count toward MAGI. So if you’re already near that line, a big conversion could push you into this tax too.

Third, state taxes. If you live in California, New York, or Minnesota, you’ll pay state income tax on your conversion too. California’s top rate is 12.3%. So a $50,000 conversion could cost you $12,000 in federal tax and $6,150 in state tax-$18,150 total. That’s a lot to pay upfront.

The rule? Don’t convert more than you can afford to pay taxes on-with cash you didn’t take from the IRA. If you use the converted money to pay the tax, you’re eating into your tax-free growth. That defeats the whole point.

How Much Should You Convert?

Start by calculating your current taxable income. Then, subtract that from the top of the next bracket. The difference is your conversion room.

Example: You’re married, filing jointly. Your taxable income this year is $280,000. The 24% bracket ends at $394,600. So you have $114,600 of room before hitting 32%. You could convert up to $114,600-but you shouldn’t. Why? Because you’re already close to the 3.8% NIIT threshold of $250,000. You’re already paying it. So converting more will only raise your MAGI further and could push you into higher Medicare premiums.

Better move: Convert $40,000 this year, $40,000 next year, and $34,600 the year after. That fills the 24% bracket without triggering extra taxes. Spread it out. Let your income breathe.

Schwab’s research shows people who spread conversions over 3.2 years on average get 18.7% better after-tax results than those who do one big conversion. Patience pays.

Roth Conversions vs. Other Strategies

Some people ask: Why not just keep contributing to a traditional 401(k)? That lowers your taxable income now. But here’s the trade-off: you’re deferring taxes, not avoiding them. When you withdraw in retirement, you’ll pay your then-current rate-probably higher.

Compare that to a Roth conversion. You pay tax now at 22%. Later, you withdraw tax-free. If your rate jumps to 28% in retirement? You win. If it drops to 12%? You lose. But most people don’t drop-they rise. Inflation, rising healthcare costs, and Social Security taxation push incomes higher in retirement.

Tax loss harvesting? Great for offsetting capital gains, but you can only use $3,000 a year to reduce ordinary income. Not enough to move the needle on a $100,000 conversion.

Bunching deductions? Useful if you’re near the standard deduction, but it only gives you a one-year tax break. Roth conversions give you a lifetime benefit.

The bottom line: Roth conversions are the only strategy that lets you lock in today’s rates and turn taxable money into tax-free money. No other tool does that.

A hand placing gold coins into tax bracket rungs on a ladder, with a clock ticking toward age 73 and a warning against using IRA funds for taxes.

What You Need to Know Before You Start

You can’t undo it. Since 2018, the IRS no longer allows recharacterizations. Once you convert, it’s final.
Use cash to pay the tax. Don’t take money from the IRA to cover the tax bill. That reduces your long-term growth.
Track your basis. If you’ve made non-deductible contributions to your traditional IRA, you need Form 8606 to avoid double taxation.
Watch state taxes. California, New Jersey, Minnesota, and others tax conversions. Factor that in.
Don’t ignore RMDs. If you’re over 73, you must take your RMD first before converting anything else.

Is This Strategy Right for You?

Ask yourself these three questions:

Do you expect to be in the same or higher tax bracket in retirement? If yes, this strategy helps.
Do you have cash on hand to pay the taxes without touching your retirement account? If yes, you’re ready.
Are you between 55 and 70, or in a year with unusually low income? If yes, this is your window.

If you answered yes to all three, you’re a perfect candidate. If you’re earning $400,000 a year and plan to keep earning that much in retirement? Don’t convert now. Wait. Or you’ll pay 35% for no benefit.

What Comes Next?

Start with your tax return from last year. Find your taxable income. Look at the 2025 brackets. Calculate how much room you have in the 22% or 24% bracket. Then, talk to a CPA who understands Roth conversions-not just a generic tax preparer. This isn’t DIY. A small mistake can cost you thousands.

And don’t wait until December. The earlier you plan, the more control you have. You can do partial conversions all year long. Many brokers let you convert $5,000 in March, another $10,000 in August, and the rest in November. That way, you can adjust based on your actual income and avoid surprises.

This isn’t about avoiding taxes. It’s about choosing when to pay them. And right now, the lower brackets are wide open. Fill them while you can.

Can I do a Roth conversion if I’m over 70?

Yes, you can. But you must first take your Required Minimum Distribution (RMD) for the year. Only after that can you convert additional funds from your traditional IRA to a Roth. The RMD itself cannot be converted-it must be withdrawn and taxed as income. Converting after taking your RMD still lets you reduce future RMDs and avoid higher tax brackets later.

Do Roth conversions affect Social Security taxes?

Yes. Roth conversions increase your Modified Adjusted Gross Income (MAGI), which determines how much of your Social Security benefits are taxable. If your MAGI crosses the $34,000 (single) or $44,000 (married) threshold, up to 85% of your benefits become taxable. That’s why many people delay conversions until after they start receiving Social Security, to avoid pushing themselves into higher taxation on both income and benefits.

Is it better to convert all at once or over several years?

Spreading conversions over multiple years almost always works better. Doing one large conversion can push you into a higher tax bracket, trigger Medicare surcharges, or bump you into the Net Investment Income Tax. Spreading it out lets you stay in lower brackets, avoid penalties, and reduce overall tax liability. Research shows taxpayers who spread conversions over 3.2 years on average see 18.7% better after-tax outcomes than those who convert everything in one year.

Can I convert only part of my traditional IRA?

Absolutely. You don’t have to convert your entire account. You can convert $10,000 one year, $15,000 the next, or even $2,000 if that’s all you need to fill the 12% bracket. This flexibility is one of the biggest advantages of Roth conversions-you control the timing and amount.

What if tax rates go up after I convert?

If tax rates rise after you convert, you win. You already paid tax at the lower rate. Your Roth account grows tax-free, and future withdrawals are completely tax-free, regardless of what the rates are then. That’s the whole point of the strategy: locking in today’s lower rates before they potentially rise. Most tax professionals expect rates to increase after 2025, making Roth conversions even more valuable.

Do Roth conversions count toward the annual IRA contribution limit?

No. Roth conversions are separate from annual contribution limits. In 2025, you can contribute up to $7,000 to an IRA ($8,000 if you’re 50+), and you can also convert any amount from a traditional IRA to a Roth IRA regardless of your income or contribution limits. The conversion doesn’t use up your contribution room.