Should I Convert $120,000 Per Year To A Roth To Avoid RMDs?

Yes, if $120,000 lands inside your target tax bracket after your other income; no, if it overflows the bracket or trips Income-Related Monthly Adjustment Amount (IRMAA) or Affordable Care Act (ACA) subsidy cliffs. Converting a fixed round number every year until the individual retirement account (IRA) is gone is allowed, and for many married pre-retirees $120,000 is close to right, but the right amount comes from rerunning the bracket math each year.

What a Roth Conversion Does to RMDs

A conversion moves money from a pre-tax account (traditional IRA, rollover IRA, or former 401(k)) to a Roth IRA. You pay ordinary income tax on the converted amount that year; in exchange, the Roth grows tax-free, has no required minimum distributions (RMDs) during your lifetime, and passes to heirs income-tax-free.

RMDs begin at age 73 under current law (75 for those born in 1960 or later, under the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act), calculated by dividing your prior-year-end balance by an IRS life-expectancy factor. A $2M traditional IRA at 73 produces a first-year RMD around $75,000 (a factor of 26.5), rising each year. That stacks on Social Security and pension income, often landing in the 22% or 24% bracket, triggering IRMAA, and taxing up to 85% of Social Security benefits. Converting before RMDs start shrinks the balance the calculation runs on, and converting the full balance eliminates RMDs entirely.

Sizing the Number: Rules and Watchouts

The bracket ceiling governs. Size conversions to fill, but not overflow, a target bracket. For a married couple filing jointly in 2026, the 22% bracket runs to $211,400 of taxable income and the 24% bracket extends to $403,550.

IRMAA. Medicare premiums are set by your modified adjusted gross income (MAGI) two years prior. For 2026 premiums, the first surcharge kicks in above $109,000 for singles and $218,000 for married couples filing jointly; know the threshold before you convert.

The ACA trap. Before 65 on marketplace coverage, conversions raise MAGI and can shrink or erase premium tax credits. With the enhanced credits expired after 2025, the 2026 cliff is back: MAGI one dollar over 400% of the federal poverty level ends the credit. A conversion that saves $15,000 in future tax can cost $10,000 in lost subsidies this year, so the net needs to be modeled.

The 5-year rule. Each conversion starts its own 5-year clock for penalty-free withdrawal of converted principal if you're under 59½.

Time horizon. Converting at 62 with $2M and decades of compounding ahead is a different trade than converting at 71 with $400,000.

An Illustrative Example

Consider a hypothetical couple: both 64 in 2026, recently retired, $1.8M in a traditional IRA rollover, $85,000 of taxable income before any conversion, not yet on Medicare. In 2026, the top of the 22% bracket for married filing jointly is $211,400 of taxable income, so they have about $126,400 of room before hitting 24%. A $120,000 conversion fits inside the 22% bracket with about $6,400 to spare, which can be worth it if their RMDs would otherwise be taxed at 24% or higher.

Two side effects need checking. Their MAGI would land near $237,200 ($85,000 of taxable income, plus the $32,200 standard deduction, plus the conversion), above the $218,000 first IRMAA threshold, so a conversion made at 64 can add a first-tier surcharge to the Medicare premiums they pay at 66. Converting about $100,000 instead keeps MAGI just under that line. On ACA coverage, their base MAGI of about $117,200 already sits above the 2026 subsidy cliff (400% of the federal poverty level, about $84,600 for a household of two), so the conversion costs them no premium credit this year. For a couple whose base income sits below the cliff, the subsidy math can outweigh the bracket math. This is a hypothetical illustration and does not project results for any actual client. It shows how bracket and subsidy math reshape a round number.

How This Connects to Roth Conversion Strategy

How much to convert each year is one piece of a larger sequence: whether to convert at all, and how to order Social Security, taxable liquidations, and conversions. I cover the full picture in Roth Conversion: A Practical Guide for High Earners and Pre-Retirees. Conversions belong in your tax plan, which determines how much of every dollar of return you keep.

Frequently Asked Questions

Is converting $120,000 per year to a Roth the right amount?

It depends on your other income, your bracket, and factors like ACA credits and IRMAA. The amount should come from a bracket analysis.

Can I convert my entire IRA to avoid RMDs?

Yes, but converting quickly can push you into the 32% or 37% bracket and cost more than the RMDs would have. Multi-year conversions across the 22% and 24% brackets usually work out better.

Do Roth IRAs have RMDs?

No, not during the account owner's lifetime under current law. Inherited Roth IRAs do have distribution requirements for non-spouse beneficiaries under the 10-year rule.

Should I convert before or after claiming Social Security?

Many retirees are better served converting in the gap years between retirement and claiming, when other income is low and bracket headroom is widest.

What to Do Next

1. Pull your most recent traditional IRA and rollover IRA balances and project what your RMDs will look like at 73 or 75 (depending on birth year) using the IRS Uniform Lifetime Table.
2. Estimate your total taxable income in the years between now and your RMD age, including any income from work, pensions, or planned Social Security claiming.
3. Map that income against 2026 bracket thresholds, IRMAA breakpoints, and, if applicable, ACA credit phaseouts to identify how much bracket headroom you have.
4. If the numbers suggest meaningful RMD exposure, bring those figures to a conversation with a fiduciary advisor who can model the multi-year conversion schedule before committing to a dollar amount.

The information provided is for educational purposes only and does not constitute investment, legal, or tax advice. Tax law changes frequently, so verify current rules before acting. Consult with qualified professionals for guidance specific to your situation.