Roth Conversion vs. Just Paying RMDs: Which Costs Less? (w/Examples) + FAQs

This article reflects federal rules as of June 2026 and covers tax year 2026. It also notes state treatment where it matters. Tax law changes — confirm current figures before you file.

Quick Answer

For most retirees with large pre-tax accounts, a planned Roth conversion costs less over a lifetime than simply paying required minimum distributions (RMDs) — if you convert in low-income years before age 73 and stay inside a target tax bracket. But for short horizons, tight cash, or low-income retirees, just paying RMDs wins.

Why This Choice Matters Right Now

You have a traditional IRA or 401(k) full of money the IRS has never taxed. At age 73, the government forces you to pull a slice out every year as an RMD, and every dollar gets taxed as ordinary income whether you need it or not. A Roth conversion lets you move money out early, pay the tax now at a rate you choose, and never face an RMD on that money again. The core question is simple: do you pay the tax now on your terms, or later on the government’s terms?

The stakes are large and the clock is real. RMD age is 73 in 2026 and rises to 75 in 2033, so anyone in their 60s has a shrinking “conversion window.” Americans now hold more than $44 trillion in retirement accounts, much of it pre-tax, and a single oversized RMD can push you into a higher bracket, trigger Medicare surcharges, and tax more of your Social Security — all in the same year.

• 💰 The real lifetime-tax difference between converting early and just paying RMDs, with the math shown.
• 📉 How a Roth conversion shrinks future RMDs by shrinking the account they are based on.
• 🏥 How both choices collide with 2026 Medicare IRMAA surcharges and the Social Security tax torpedo.
• 👵 The “widow’s penalty” that quietly doubles a surviving spouse’s tax rate — and which strategy defuses it.
• ✅ A step-by-step decision path, the forms to file, the deadlines to hit, and when to call a pro.

Deconstructing the Two Strategies

Before comparing costs, you need to understand exactly what each path is and what triggers it. Both deal with the same problem — money in a tax-deferred account that the IRS eventually wants its cut of — but they attack it from opposite directions.

What a Required Minimum Distribution Is

An RMD is the minimum amount the IRS forces you to withdraw from a tax-deferred account each year once you reach your required beginning age. For 2026, that age is 73, per the SECURE 2.0 Act. You calculate it by dividing your December 31 prior-year balance by a life-expectancy factor from the IRS Uniform Lifetime Table. The whole withdrawal is taxed as ordinary income.

The consequence of ignoring an RMD is steep: a 25% excise tax on the amount you failed to take, which drops to 10% if you fix it within two years. A real example: if your 2026 RMD is $40,000 and you take only $10,000, the $30,000 shortfall can cost you a $7,500 penalty on top of the income tax. A common misconception is that you can skip an RMD in a down market — you cannot; the rule is based on last year’s balance, not this year’s. What to do: take the full RMD by December 31 (April 1 of the next year only for your very first one), and set a calendar reminder every year after.

What a Roth Conversion Is

A Roth conversion moves money from a pre-tax account (traditional IRA or 401(k)) into a Roth IRA. You pay ordinary income tax on every converted dollar in the year you convert, but from then on the money grows tax-free, comes out tax-free in retirement, and is never subject to RMDs during your lifetime. There is no income limit and no dollar limit on conversions.

The consequence of converting carelessly is paying tax at a higher rate than you needed to, or spiking your income into a Medicare surcharge tier. A real example: converting $200,000 in one year for a couple can leap you from the 22% bracket into the 32% bracket and add thousands in IRMAA two years later. A common misconception is that a conversion is “free money later” — it is not; you are pre-paying tax, and that cash is gone. What to do: convert deliberately in measured amounts that “fill up” a target bracket, and pay the tax from a taxable account, not from the IRA itself.

How the Two Connect

The link between them is the account balance. RMDs are a percentage of your pre-tax balance, so the bigger that balance grows, the bigger every future RMD becomes. A Roth conversion permanently removes dollars from the pre-tax bucket, which shrinks the base every future RMD is calculated from. In short, converting today is a way of pre-shrinking tomorrow’s forced withdrawals — that is the entire mechanism behind “which costs less.”

Which Situation Applies to You?

The right answer depends on your facts. Find yourself below and read the matching example.

• You are 60–72 with a large pre-tax balance and modest current income. You are in the classic “conversion window” — converting now likely costs less. See Margaret’s example.
• You are already 73+ and just taking RMDs. Conversions can still help at the margins, but the window is narrower. See Frank’s example.
• You are a higher-income couple near the Medicare or top brackets. IRMAA and bracket math dominate your decision. See Tom and Linda’s example.
• You are single, low-income, or have a short time horizon (under ~8 years). Just paying RMDs usually wins — do not convert into a higher bracket for a benefit you may never collect.
• You give to charity. A qualified charitable distribution (QCD) may beat both strategies for the charitable slice of your RMD.

The Core Comparison: Convert Now or Pay Later

The decision comes down to one comparison: your tax rate today versus your expected tax rate in the future. If you believe your future rate (or your heir’s rate) will be higher than today’s, converting now costs less. If you expect a lower future rate, paying RMDs later costs less.

What You Are Weighing	What It Means for Your Cost
Tax rate today is lower than your future rate	Convert now — you lock in the cheaper rate and kill future RMDs
Tax rate today is higher than your future rate	Pay RMDs later — converting overpays tax you could have deferred
You will leave the account to heirs	Convert — heirs face the 10-year drain rule and often a higher bracket
You have under ~8 years and no taxable cash to pay the tax	Pay RMDs — there is too little time to recover the upfront tax hit

Three forces decide the winner: your time horizon (longer favors conversion), your source of tax money (paying from a taxable account favors conversion), and bracket arbitrage (a gap between today’s rate and tomorrow’s favors conversion). Federal law sets the 2026 brackets — the 22% bracket runs to $105,700 for singles and $211,400 for joint filers, and the 24% bracket runs to $201,775 and $403,550. Most conversion plans aim to “fill” the 22% or 24% bracket without spilling into the next.

Worked Example: The Lifetime Cost of Each Path

Here is the math, fully worked, so you can copy it. Meet a married couple, both 63, with $1,500,000 in a traditional IRA in 2026. Assume 6% annual growth and a goal of comparing total lifetime tax.

Path A — Just pay RMDs (no conversions). They let the IRA grow untouched. By age 73 (2036) at 6% growth, $1.5M becomes about $2,686,000. Their first-year RMD factor at 73 is 26.5, so the 2036 RMD is $2,686,000 ÷ 26.5 = about $101,400. Added on top of Social Security and other income, much of that RMD lands in the 24% bracket, and rising balances push later RMDs higher still — peaking near $150,000+ a year in their late 70s. Across a 25-year retirement, the forced withdrawals plus growth keep them in the 24% bracket and repeatedly trip the IRMAA threshold.

Path B — Convert during the trough years (ages 63–72). Each year they convert enough to “fill” the 24% bracket. With other income around $90,000, they have roughly $313,000 of room to the top of the 24% bracket ($403,550) before hitting 32%. To stay conservative and dodge IRMAA, they instead convert about $120,000 a year for 10 years, paying roughly 22%–24% on it. After 10 years they have moved roughly $1.2M into the Roth, the remaining traditional balance is far smaller, and their age-73 RMD drops to about $26,000 instead of $101,400.

The bottom line of the math: Path B pre-pays tax at a known 22%–24% during low-income years and slashes every future RMD by about 75%. Path A defers tax but lets the balance — and the forced taxable RMD — balloon, often pushing later income into the 24% bracket plus IRMAA surcharges. Over a joint 25-year horizon, Path B typically saves a couple like this $150,000–$300,000 in lifetime tax and surcharges, with the gap widening sharply if money is left to heirs.

Three Named Scenarios

Margaret, 65, Recently Retired Single Filer

Margaret has $900,000 in a traditional IRA and only $35,000 of pension income before age 73. Her goal is to lower lifetime tax and protect against the single-filer brackets. She converts $70,000 a year, filling her 22% bracket (which tops out at $105,700 in 2026). The result: by 73 her IRA is roughly half its size, her RMDs are modest, and she paid tax at 22% instead of the 24%+ her uncontrolled RMDs would have triggered. Converting cost her less.

Frank, 74, Already Taking RMDs

Frank is past 73 with a $600,000 IRA and a $48,000 RMD that already fills his bracket. The result of converting more now is that any extra dollar is taxed at his top marginal rate with no bracket gap to exploit, and a conversion does not satisfy his RMD. For Frank, just paying the RMD costs less — though he uses a QCD to give $15,000 to charity, which counts toward his RMD and is excluded from income.

Tom and Linda, 67, High-Income Couple

Tom and Linda have $2,200,000 pre-tax and $140,000 of other income. Their goal is to defuse the future “widow’s penalty” and avoid the top IRMAA tiers. They convert $80,000 a year — small enough to keep their MAGI under the 2026 IRMAA cliffs ($218,000 joint). The result: when Tom dies and Linda files single, her brackets and IRMAA thresholds roughly halve, but her Roth dollars come out tax-free. Converting cost them far less once the survivor’s single-filer years are counted.

The Hidden Costs RMDs Trigger

Both strategies create taxable income, but uncontrolled RMDs tend to trip three expensive trip-wires that a planned conversion can sidestep.

Medicare IRMAA Surcharges

The Income-Related Monthly Adjustment Amount (IRMAA) is a surcharge added to Medicare Part B and Part D premiums when your MAGI is high. For 2026, the standard Part B premium is $202.90 a month, and surcharges begin once MAGI tops $109,000 (single) or $218,000 (joint), based on your tax return from two years earlier. The consequence: a large RMD or an oversized conversion two years ago can add $1,148 to $6,936 per person per year. What to do: size every conversion to stay below the next IRMAA tier, and remember IRMAA is a cliff — one dollar over costs the full surcharge.

The Social Security Tax Torpedo

When other income rises, more of your Social Security becomes taxable — up to 85% of it. A big RMD can push a retiree from having little Social Security taxed to having 85% taxed, creating marginal rates that briefly exceed your stated bracket. The consequence is a stealth tax spike in your RMD years. What to do: convert before you claim Social Security where possible, so the conversion income does not stack on top of benefits.

The Widow’s Penalty

When one spouse dies, the survivor usually files as a single taxpayer the following year, with brackets and IRMAA thresholds roughly half of the joint amounts — but often similar income. The consequence is a sudden jump in the survivor’s tax rate on the same RMDs. A Roth conversion done while both spouses are alive moves money into a bucket the survivor can draw tax-free, defusing the penalty. What to do: prioritize conversions if there is a meaningful age or health gap between spouses.

Does My State Tax This?

Federal rules are only half the picture. States do not all follow the federal treatment, and your state can flip the answer.

• No-income-tax states (Florida, Texas, Nevada, Tennessee, Washington, and others) tax neither RMDs nor conversions, so only federal tax matters. Retirees here lean toward converting because there is no state tax on the conversion now or the RMD later.
• States that fully tax retirement income (such as California) tax both RMDs and Roth conversions as ordinary income. Converting while living in a high-tax state adds state tax to the upfront cost — some retirees wait until they relocate.
• States that exempt or partially exempt retirement income (such as Illinois, which exempts most retirement income, or Pennsylvania) may make RMDs cheaper at the state level, weakening the case to convert.

The takeaway is to run the math with your combined federal-plus-state rate. A conversion that looks smart at a 24% federal rate may look different at 24% federal plus 9%+ state. Confirm your state’s treatment on your state revenue agency’s website before converting.

The 2025 Law Twist: The New Senior Deduction (OBBBA)

The One Big Beautiful Bill Act (OBBBA), enacted in 2025, created a temporary extra deduction for seniors that interacts directly with both strategies — and it is easy to accidentally destroy by converting too much.

The effective and sunset years. The senior deduction is available for tax years 2025 through 2028 and then expires unless Congress extends it. Plan around the sunset: the benefit may not exist when later RMDs hit.

The amount and who qualifies. Taxpayers age 65 or older get an extra $6,000 deduction per person ($12,000 for a qualifying couple) on top of the standard deduction. It is not available to those filing married filing separately, and you need an SSN valid for employment.

The income phase-out — and why it matters here. The deduction begins to phase out at MAGI above $75,000 (single) or $150,000 (joint) and disappears completely at $175,000 (single) or $250,000 (joint), reduced 6% for every dollar over the threshold. Because a Roth conversion raises your MAGI, a large conversion can phase out your $6,000–$12,000 senior deduction — an extra hidden cost. The consequence: a $30,000 over-conversion could quietly cost a couple their full $12,000 deduction.

How to claim it and the state angle. You claim it on your federal Form 1040; it stacks with the standard deduction and the existing extra age-65 amount. Many states do not conform to this new federal deduction, so do not assume it lowers your state tax. A worked note: a couple converting up to $150,000 MAGI keeps the full deduction, but pushing to $250,000 MAGI loses all $12,000 — effectively raising the marginal cost of those top conversion dollars. The smart move during 2026–2028 is to size conversions to preserve the senior deduction.

Mistakes to Avoid

• Paying the conversion tax from the IRA itself. This shrinks the tax-free base and, if you are under 59½, adds a 10% penalty on the withholding — convert and pay tax from a taxable account instead.
• Converting in one giant lump. A single huge conversion can vault you two brackets up and trigger IRMAA — spread it across several low-income years.
• Ignoring the two-year IRMAA lookback. Your 2026 conversion sets your 2028 Medicare premium, so the surcharge surprises you later.
• Assuming a conversion satisfies your RMD. It does not — if you are 73+, you must take the full RMD first, then convert; converting the RMD itself is a prohibited excess contribution.
• Forgetting state income tax. Converting in a high-tax state adds state tax you might have avoided by waiting until a move.
• Missing the five-year clock. Each conversion has its own five-year rule for penalty-free access to the converted amount before 59½.
• Over-converting and losing the senior deduction. Pushing MAGI past the OBBBA phase-out can erase up to $12,000 of deduction during 2025–2028.
• Forgetting the Social Security torpedo. Conversion income stacked on benefits can tax up to 85% of your Social Security.

Do’s and Don’ts

• Do convert during low-income “trough years” between retirement and age 73 — that is when bracket space is cheapest.
• Do size each conversion to fill, but not overflow, a target bracket — it keeps your marginal rate predictable.
• Do pay the conversion tax from taxable savings — it preserves the maximum tax-free balance.
• Do watch the IRMAA tiers two years ahead — they are cliffs, not ramps, so one dollar matters.
• Do model the surviving-spouse years — the widow’s penalty often makes conversion worth it.
• Don’t convert if your future rate will clearly be lower — you would overpay tax now for nothing.
• Don’t convert money you will need within five years — the clock and liquidity risk work against you.
• Don’t forget to take your RMD before converting once you are 73 — the order is legally required.
• Don’t assume your state follows federal rules — conformity varies and changes the math.
• Don’t convert blindly without projecting Medicare and Social Security effects — the side costs can swamp the bracket savings.

Pros and Cons

Pros of converting (vs. just paying RMDs):

• Eliminates RMDs on the converted money, because Roth IRAs have no lifetime RMDs — that shrinks all future forced income.
• Locks in today’s rate, which helps if you expect higher rates later or a survivor filing single.
• Creates tax-free growth, so decades of gains never get taxed again.
• Defuses the widow’s penalty, protecting the surviving spouse from a single-filer rate spike.
• Gives heirs a tax-free inheritance, sparing them the 10-year drain at their own (often higher) bracket.

Cons of converting:

• Requires a large tax payment now, which is real cash out of pocket today.
• Can backfire if your future rate is lower, because you prepaid at a needless premium.
• May trigger IRMAA and Social Security taxation in the conversion year if oversized.
• Has a five-year access rule, so converted funds are not instantly penalty-free before 59½.
• Can phase out the OBBBA senior deduction during 2025–2028 if it pushes MAGI too high.

What to Do Next

1. Pull your numbers. Gather your December 31, 2025 pre-tax balances, your 2026 expected income, and your filing status.
2. Project your RMDs. Estimate your age-73 RMD using the Uniform Lifetime Table to see how big the forced income gets.
3. Find your bracket room. Subtract your other income from the top of your target 2026 bracket — that is your annual conversion budget.
4. Check the IRMAA cliffs. Confirm your planned MAGI stays under $109,000 (single) or $218,000 (joint) for 2026 if you want to avoid surcharges.
5. Convert and report. Execute the conversion with your custodian; it will be reported on Form 1099-R and reconciled on Form 8606 with your return by the April 15, 2027 filing deadline.
6. Call a pro when it gets complex. If you have multiple accounts, a pension, a surviving-spouse plan, or a high balance, a CPA or fee-only advisor can model the lifetime numbers — typically a few hundred to a few thousand dollars, and often worth far more than that in saved tax. This article is educational, not personalized advice.

FAQs

Does a Roth conversion count as my RMD? No. A conversion does not satisfy your RMD. If you are 73 or older in 2026, you must take the full RMD first, then convert any additional amount. Converting the RMD itself creates an excess contribution.

At what age do RMDs start in 2026? Age 73. Under SECURE 2.0, anyone reaching 73 in 2026 must begin RMDs, with the first one due by April 1, 2027, and every later one by December 31. The age rises to 75 in 2033.

How much is the RMD penalty in 2026? 25% of the shortfall. The excise tax on a missed RMD is 25% of the amount you failed to withdraw, reduced to 10% if you correct it within two years and file the proper form.

Is there an income limit on Roth conversions? No. Anyone can convert any amount regardless of income — unlike direct Roth contributions, conversions have no MAGI limit and no dollar cap for tax year 2026.

Will a Roth conversion raise my Medicare premiums? Yes, potentially. A conversion raises MAGI, and if it crosses the 2026 IRMAA thresholds of $109,000 (single) or $218,000 (joint), it can add surcharges to your Part B and Part D premiums two years later.

Can I avoid RMDs entirely with conversions? Only on converted money. Roth IRAs have no lifetime RMDs, so amounts you convert escape RMDs. Money left in the traditional account still has RMDs based on its year-end balance.

What is the five-year rule for conversions? Five tax years. Each conversion must season for five years before you can withdraw that converted amount penalty-free if you are under 59½. The clock starts January 1 of the conversion year.

Are Roth conversions taxed by my state? It depends. States with no income tax (like Florida) do not tax them, while states like California tax conversions as ordinary income. Check your state revenue agency before converting.

Does converting affect the new senior deduction? Yes. A conversion raises MAGI and can phase out the OBBBA senior deduction, which is available for 2025–2028 and disappears above $175,000 (single) or $250,000 (joint) of MAGI.

Can I use my RMD to do a Roth conversion? No. RMD dollars are not eligible to be rolled or converted to a Roth. You must take the RMD as a taxable distribution first, then convert separate funds.

What is a QCD and how does it compare? A qualified charitable distribution. A QCD lets those 70½+ send up to $108,000 (2025 amount, indexed) directly from an IRA to charity, counting toward the RMD and excluded from income — often better than converting for the charitable slice.

Is it ever too late to convert? No, but the benefit shrinks. You can convert at any age, but once RMDs and Social Security already fill your bracket, the bracket-arbitrage advantage largely disappears.

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