Optimize: Roth Conversion Amounts
Converting Traditional savings to Roth means paying tax now to avoid larger Required Minimum Distributions — and a bigger tax bill — later. But how much to convert each year is a genuinely hard optimization, because the right answer balances today’s brackets, tomorrow’s RMDs, IRMAA surcharges, and what your heirs would owe. The Optimizer can search it for you.
First read the Optimizer overview for how searches work and what to expect.
Background: Roth conversions and Taxes.
Set it up
Before you start — a conversion needs somewhere to go. Make sure you have Traditional (pre-tax) balances to convert from and at least one Roth account to convert into. The Roth account can be empty — it just has to exist. If there’s no matching account, the Strategy tab now flags the rule in amber (e.g. "no Roth IRA account exists to convert into, so this rule won’t run"), so you’re not left wondering why nothing happened. Add accounts on the Accounts tab.
- On the Optimizer, add Roth conversion amount as a dimension and set the annual-dollar range to search.
- Choose your objective carefully — this matters more here than almost anywhere:
- After-tax legacy is often the best choice: it captures the whole point of conversions, because it accounts for the income tax your heirs would otherwise pay on inherited Traditional accounts.
- Success rate if your priority is durability.
Avoid optimizing on "Lifetime Taxes Paid" alone. It’s the most tempting objective for conversions and the most misleading: a strategy can show lower lifetime taxes simply because the portfolio depleted faster. Anchor on success rate or after-tax legacy first, and read taxes within that.
What to expect
A single conversion-amount sweep is quick to run.
Reading the results
- The sweet spot usually "fills the brackets" in the lower-income years between retirement and when RMDs begin — converting enough to use up a low bracket without spilling into a high one.
- Watch the two-year IRMAA echo. A big conversion can push your income over an IRMAA threshold and raise your Medicare premiums two years later. The model captures this; notice it in the results before committing.
- Confirm finalists on the Compare tab.
How the conversion tax is paid
The conversion tax is paid from your portfolio. The full amount you enter moves into the Roth, and the resulting tax is drawn from your accounts at year-end — Taxable first, then your normal withdrawal allocation, the same as every other tax bill. So enter the full gross amount you’re considering converting; you don’t need to net it down for the tax.
That’s the conservative, realistic treatment: a conversion pulls real dollars out of your portfolio to cover the tax, which is exactly why the amount and timing matter. (If in real life you’d pay the tax with cash you deliberately keep outside the plan, the model can’t see that money — so the portfolio drain it shows is the cautious case.)
RetireRange is for educational and planning purposes only and is not financial, tax, or investment advice. Optimizer rankings are modeled estimates based on your assumptions — not predictions or recommendations. Consult a qualified financial planner for advice specific to your situation. See Limitations.