Before Doing a Roth Conversion, Evaluate These Three Thresholds
To avoid getting flattened by higher taxes or Medicare premiums related to Roth conversions, make sure you look both ways on your tax rates.


Imagine you’re crossing a road and are looking only to the left. You’ll be good for part of the road but may get hit by a car coming from the other direction. That’s kind of like doing a Roth conversion and looking only at income tax rates. You may do your math perfectly — but then realize that you unintentionally jumped into new Medicare premium brackets and possibly higher capital gains rates.
I see all sorts of articles online regarding the benefits of doing $100,000 Roth conversions over a 10-year period, which makes me think that a lot of people aren’t even evaluating income tax brackets. But that’s the best place to start when evaluating whether a Roth conversion makes sense.
Here are three thresholds you need to consider before deciding to do a Roth conversion:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Your income tax rate.
This is us looking left. The reality of a Roth conversion is that it’s just a bet that your current tax rate is lower than your future tax rate. If so, you’d rather pay the taxes today. If you’re in the period between retirement and when you start RMDs (required minimum distributions), this can be a pretty safe bet.
I met with a client the other day who is three years out from RMDs. Once both spouses start receiving RMDs, that will push them from the 24% marginal bracket to 32%. So, in doing the conversion calculation, we want to see how much we can convert while staying in the 24% bracket.
2. Your capital gains tax rate.
We are looking right. People talk about capital gains tax rates as though they are 15% for everyone. That is not the case. Evaluating capital gains rates is most important at low income levels and at high income levels.
When your income is very low, a Roth conversion can cause you to go from paying 0% in capital gains to paying 15% on everything. This is an expensive trigger.
Once taxable income crosses above $518,900 (S) or $583,750 (MFJ) for 2024, you jump from 15% to 20%. Less talked about is the 3.8% net investment income tax, which, as it sounds, is a tax on investment income over $200,000 for individuals and $250,000 for a married couple filing jointly.
3. Your Medicare premiums.
Finally, we are going to check the bike lane to ensure we don’t get smacked by an e-bike. Premiums for Medicare Parts B and D are income-adjusted. However, unlike the above income tests, Medicare premiums are determined by gross, not taxable, income. The Part B premiums can increase by as much as $419 per month, per person, based on income. In my experience, this is the one that upsets people the most.
To be clear, you’re not always trying to stay under every threshold. In many situations, it makes sense to pay more in Medicare premiums to avoid a much larger income tax bill down the road.
Evaluating Roth conversions in your situation requires projecting out your future tax rates; i.e., should you even be crossing the road at all? To get a sense of what your rates may look like, you can build out a free plan here.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
-
RMD Deadline April 1: Five Tax Strategies to Manage Your 2025 Income
Taxable Income The April 1, 2025, deadline for required minimum distributions (RMDs) is fast approaching for retirees who turned 73 in 2024.
By Kelley R. Taylor Published
-
Rising AI Demand Stokes Undersea Investments
The Kiplinger Letter As demand soars for AI, there’s a need to transport huge amounts of data across oceans. Tech giants have big plans for new submarine cables, including the longest ever.
By John Miley Published
-
The Three Biggest Fears Keeping Retirees Up at Night
Here are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
By Pam Krueger Published
-
What Can a Donor-Advised Fund Do for You? (A Lot)
DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
By Julia Chu Published
-
Estate Planning When You Have International Assets
Estate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
By Kelsey M. Simasko, Esq. Published
-
Three Essential Estate Planning Steps to Protect Your Nest Egg
After dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
By Nicole Farbo, CFP® Published
-
Is Chasing the American Dream Ruining Your Financial Life?
Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
By Anthony Martin Published
-
Retiring With a Pension? Four Things to Know
The road to a secure retirement is slightly more intricate for people with pensions. Here are four key issues to consider to make the most out of yours.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
How to Teach Your Kids About the Tax Facts of Life
Taxes are unavoidable, so it's important to teach children what to expect. Also, does your child need to file a tax return for 2024? Find out here.
By Neale Godfrey, Financial Literacy Expert Published
-
Revocable Living Trusts: The Good, the Bad and the Ugly
People are conditioned to believe they should avoid probate at all costs, but when compared with living trusts, probate could be a smart choice for some folks.
By Charles A. Borek, JD, MBA, CPA Published