Life knowledge after service

Common Roth conversion mistakes

A Roth conversion moves money from a traditional IRA (a retirement account where you have not yet paid tax) into a Roth IRA (an account you already own, where you pay the tax now so withdrawals later are tax-free). Here is where that move goes wrong, and what the rule actually says.

← Back to vsgsolutions.org Roth IRA rules on IRS.gov
Why I wrote this. I did two years in the transition office at Fort Riley. I watched Soldiers make expensive money mistakes because nobody sat them down and explained the actual rule. I am not a CPA and I am not selling anything. I bring the truth, simple and to the point. I have nothing left in this world than my word. These are 2026 numbers — they change most years, so check the IRS and Social Security links below before you act.
Mistake 1

Thinking the bracket eats your whole income

Converting means you pay the income tax this year, not later. That part is simple and true.

  • A big conversion can push you into a higher tax bracket for the year.
  • But a higher bracket does not tax your whole income at the higher rate. In the IRS's own words: "When your income jumps to a higher tax bracket, you don't pay the higher rate on your entire income. You pay the higher rate only on the part that's in the new tax bracket."
★ You pay more only on the slice that's in the new bracket.
Mistake 2

Missing the Medicare premium hit

A large conversion can raise your Medicare Part B and Part D premiums — but not this year.

  • Your premium surcharge, called IRMAA, is set from your tax return from two years earlier. A conversion this year can raise your premium two years from now, not right away.
  • 2026 numbers: standard Part B premium is $202.90/month, deductible $283. The surcharge starts above $109,000 modified adjusted gross income filing individually, or $218,000 filing jointly, and adds $81.20 to $487.00/month to Part B by income tier, plus a separate $14.50 to $91.00/month on Part D.
A Roth conversion by itself does NOT let you appeal the surcharge. Form SSA-44 only works if one of Social Security's listed events actually happened: you or your spouse married, divorced, or died; stopped working or cut hours; lost income property to a disaster; lost pension income from a plan termination; or got an employer settlement from a closure or bankruptcy. A bigger income by itself is not on that list. If income alone pushed you over, the higher premium stands for that year. Plan the size of the conversion around the threshold before you convert — there is no appeal after.
★ Plan the size before you convert, not after.
Mistake 3

Getting the 5-year rule wrong

There are two separate 5-year clocks, and mixing them up scares people away from money that is already theirs, free and clear.

  • Clock 1 — conversions. The amount you converted was already taxed, so withdrawing it is never taxed again. But if you are under 59½ and you pull it out before that conversion's own clock ends, you owe a 10% additional tax on the part that was taxable when you converted. Each conversion gets its own clock, and it starts on January 1 of the tax year you converted — not the day you converted. A conversion done in December is nearly a full year into its own clock already. Once you are over 59½, this 10% does not apply to you at all.
  • Clock 2 — earnings. Growth inside the Roth comes out completely tax-free only in a "qualified distribution": at least 5 tax years after the first year you made any Roth contribution or conversion (counted from January 1 of that first year, and it never restarts), AND you are 59½ or older, disabled, deceased, or using up to $10,000 (a lifetime limit, not renewable) toward a first home.
  • Order matters. Money leaving a Roth IRA comes out in a fixed order: your regular contributions first, then your conversions oldest-first, then earnings last. All your Roth IRAs count as one account for this. Your own regular contributions come out at any age, any time, tax-free and penalty-free — you only reach conversion money after those are used up, and earnings after that.
★ Two clocks, one order — know both before you assume the worst.
Mistake 4

Not seeing what it does to your Social Security

Future income, including a conversion, can change your bracket — and it can change how much of your Social Security gets taxed.

  • Your "combined income" is your adjusted gross income, plus tax-exempt interest, plus half your Social Security benefit. Filing individually: above $25,000, up to 50% of your benefit is taxable; above $34,000, up to 85% is. Filing jointly: above $32,000, up to 50%; above $44,000, up to 85%. These dollar lines are fixed in the law and do not move with inflation.
  • The flip side is the real argument for converting: a qualified Roth withdrawal later does not count toward your adjusted gross income at all, so it never adds to that combined-income number.
★ A conversion can tax your Social Security today, or protect it tomorrow.
Mistake 5

Treating conversion as the only tool

A conversion is one option among several, not the default move.

  • Your employer plan, your IRAs, and a health savings account (HSA) each carry their own rules and limits. Compare what each one actually does for you before you convert anything.
  • I won't tell you to "max out other accounts first" — no federal agency publishes that as a rule, and it isn't right for everybody. Compare, don't assume an order.
★ Compare your options. Don't assume conversion comes first.
Mistake 6

Not planning for the tax bill

The tax on a conversion is due the year you convert — and for a big one, that can mean a payment before next April, not just a bigger bill when you file.

  • You generally owe estimated tax if you expect to owe $1,000 or more after withholding. You avoid the underpayment penalty by paying the smaller of 90% of this year's tax or 100% of last year's tax — but that 100% becomes 110% if your adjusted gross income last year was over $150,000 ($75,000 if married filing separately). A big conversion is exactly what pushes people over that line, so the year after a large conversion, your safe number is usually 110%, not 100%.
  • Two things that help: your withholding for the year counts as paid evenly across all four due dates no matter when it actually came out of your pay, and if the conversion happened late in the year, the annualized income installment method (Form 2210, Schedule AI) lets you match the payment to the quarter the conversion actually happened instead of being penalized as if it arrived in January.
Have the cash to pay that tax from outside the IRA. If you're under 59½ and instead have the tax withheld out of the IRA itself, that withheld amount never reaches the Roth — it counts as its own early distribution and gets hit with the 10% additional tax on top of the income tax.
★ Pay from savings, not from the conversion itself.
The one nobody warns you about

The pro-rata rule

This is the single most expensive conversion error, and the one most people miss.

If you hold any pre-tax money in any traditional, SEP, or SIMPLE IRA — even one you forgot about — you cannot convert only your after-tax contributions and call the rest tax-free. The IRS adds up all of your traditional IRAs together on Form 8606 to figure the taxable share. A conversion you expected to be tax-free can come back mostly taxable.
★ Know every traditional IRA you own before you convert any of them.
Can't undo it

A conversion is permanent

The old do-over is gone.

The IRS: a conversion "made in tax years beginning after December 31, 2017, cannot be recharacterized as having been made to a traditional IRA." Once you convert, that decision stands. Convert less than you think you need to before you're sure — you can always convert more next year.
★ No reverse gear. Go slow the first time.
Know your account

Rules that depend on what you're holding

  • Required minimum distribution (RMD) age? Take the year's RMD first. The first dollars out of the account in that year ARE the RMD, and an RMD cannot be rolled over or converted.
  • SIMPLE IRA through a new employer? For your first 2 years in that plan you can only transfer to another SIMPLE IRA — you cannot convert to a Roth IRA yet. Pull it out anyway during those 2 years and the additional tax is 25%, not the usual 10%. After 2 years you can roll it into a Roth.
  • Thrift Savings Plan (TSP)? These are IRA rules. Your TSP balance is governed by TSP's own rules, not by anything on this page — check tsp.gov before you assume this page covers it.
  • Worried you earn too much to convert? There is no income limit on a conversion. Income limits only apply to Roth contributions, not conversions. Don't rule yourself out without checking.
★ The rule that applies to you depends on the account you're holding.
The upside, stated plainly

A Roth IRA has no lifetime RMD

The IRS: "You can leave amounts in your Roth IRA as long as you live." A traditional IRA forces withdrawals starting at a certain age. A Roth IRA does not, for as long as you're the owner. (If you inherit a Roth from someone else, different distribution rules apply to you as the beneficiary.)
★ Eight reasons to be careful deserve one reason it might be worth it.
Free help, no sales pitch

Where to get this checked before you file

You can hire a professional, but there are no-cost options first.

  • IRS Free File — free federal tax prep and filing for eligible incomes, straight from IRS.
  • VITA and TCE — the IRS's Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs prepare returns for free, in person.
  • MilTax, through Military OneSource — free tax prep and e-filing built for the military community, including many veterans.

This is a long game. Don't convert without a plan for your retirement and your taxes — that much is sound advice, even though no agency publishes it as a rule.

★ Get it checked for free before you decide.

Read the rule yourself

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