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Roth Conversion Strategy for Wealthy Families

A $3M traditional IRA left unaddressed will generate $120,000+ per year in forced RMD income at age 73—pushed into your highest bracket. Here's how to think through conversions before that window closes.

The RMD problem at $2M–$20M

If you've spent 20–30 years maxing out a 401(k) and rolling it to an IRA, you may be sitting on a large traditional IRA that feels like an asset. It is—but it also comes with a liability: Required Minimum Distributions (RMDs).

Under SECURE 2.0 (IRC § 401(a)(9)), RMDs begin at age 73 for those born 1951–1959, and age 75 for those born 1960 and later. You can't defer this income. It gets added to your other income—Social Security, dividends, capital gains—and taxed at ordinary rates. For a family with a $3M IRA earning 6% annually, the IRA may grow to $5M by age 73. The first-year RMD on $5M would be approximately $189,000 (balance ÷ 26.5 per the IRS Uniform Lifetime Table1).

$189,000 of additional ordinary income on top of Social Security, dividends, and any part-time income can push a married couple deep into the 32% or 35% bracket—possibly triggering IRMAA Medicare surcharges on top of that.

The core trade: Pay tax on a smaller amount now (at today's rate) to eliminate larger forced withdrawals later (at a potentially higher rate). The math works when your current marginal rate is at or below your expected RMD marginal rate.

Who benefits most from Roth conversions

Conversions tend to produce the clearest benefit when you're in the conversion window—the years between retirement (when income drops) and when RMDs begin. In this window:

Conversions also benefit families who plan to leave IRA assets to heirs. Under the SECURE 2.0 10-year rule, non-spouse beneficiaries must empty an inherited traditional IRA within 10 years—creating potentially large income spikes for heirs during their peak earning years. A Roth IRA inherited under the same rules produces tax-free withdrawals.

The IRMAA trap: watch the $218,000 threshold

Medicare Part B premiums for 2026 are $202.90/month at base. But if your MAGI exceeds $218,000 (married filing jointly), you enter the first IRMAA tier and pay a surcharge of $81.20/person/month—an extra $1,948.80/year per person, or $3,898/year for a couple.2

IRMAA is determined on a two-year lookback (your 2026 Medicare premium is based on your 2024 MAGI). But Roth conversions done today will affect IRMAA two years from now. A $50,000 conversion that pushes MAGI from $200,000 to $250,000 might trigger an IRMAA surcharge that persists until you file an appeal showing a life-changing event. Factor this into the conversion math.

2026 IRMAA tiers (married filing jointly, Part B surcharge per person per month):2

Roth Conversion Impact Calculator

This calculator projects your IRA balance to RMD age, estimates the annual RMD and its tax cost, then shows what happens if you convert a set amount each year in the interim. All figures use 2026 MFJ tax brackets.3

Model uses 2026 MFJ brackets and standard deduction ($32,200). Retirement income in RMD tax projection is capped at $120,000 to approximate lower earned income in retirement. Actual results will vary based on state taxes, Social Security, other income, and tax law changes. This is a projection tool, not tax advice.

Roth conversion strategies for $2M–$20M families

1. Fill the bracket — don't cross it

The most common strategy: convert enough each year to fill your current tax bracket without spilling into the next. If your other income is $150,000 (taxable $117,800 after standard deduction), you can convert up to $93,600 more before hitting the 32% bracket at $211,400 taxable income. Stop there.

Done repeatedly over 10–15 years before RMDs begin, this systematically reduces the IRA balance at the lowest available rate—without triggering IRMAA surcharges unnecessarily.

2. Pay the tax from outside funds

The math only works cleanly if you pay the conversion tax from a taxable brokerage account—not from the IRA itself. If you take an extra $100,000 from the IRA to pay the taxes on a $100,000 conversion, you've effectively converted $200,000 (paid tax on the whole $200K) while only funding $100,000 of Roth. Use outside cash or taxable assets to cover the tax bill.

3. The 5-year rule matters for timing

Each Roth conversion starts its own 5-year holding period before that specific converted amount (not earnings) can be withdrawn penalty-free if you're under 59½.4 If you're already over 59½, this doesn't apply—withdrawals are unrestricted. But if you're converting at age 54 and want to access converted funds at 58, the 5-year rule doesn't block you by then.

4. The estate planning angle

A traditional IRA left to heirs is a tax bomb. The heirs get ordinary income tax on every dollar they withdraw, and they must empty the account within 10 years under the SECURE 2.0 Act. If you're a non-earning heir in a high-bracket year—say, a 50-year-old still in peak earnings when they inherit—those RMDs can stack badly.

A Roth IRA inherited under the same 10-year rule produces tax-free withdrawals. Converting a traditional IRA to Roth before death is one of the cleaner intergenerational tax moves available, especially when the conversion is done at a rate below what heirs would face.

See also: Estate Planning for Wealthy Families →

What this doesn't capture

The calculator above is a simplified model. Real conversion analysis also factors in:

The interaction of these variables is why sophisticated Roth conversion planning—particularly at $3M+ IRA balances—genuinely warrants a fee-only advisor with tax expertise rather than rules of thumb.

Calculate the total value of fee-only advisor coordination →

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Sources

  1. IRS Publication 590-B — Distributions from Individual Retirement Arrangements (IRAs), Uniform Lifetime Table. RMD divisor age 73: 26.5; age 75: 24.6. Table updated per Treasury final regulations (T.D. 9930, 2022).
  2. SSA POMS HI 01101.020 — IRMAA Sliding Scale Tables. 2026 MFJ Tier 1 threshold: $218,000 MAGI; Part B surcharge $81.20/person/month. Values verified April 2026.
  3. IRS Rev. Proc. 2025-32 — 2026 Inflation Adjustments. MFJ brackets: 10% to $24,800; 12% $24,801–$100,800; 22% $100,801–$211,400; 24% $211,401–$403,550; 32% $403,551–$512,450; 35% $512,451–$768,700; 37% above $768,700. Standard deduction MFJ: $32,200.
  4. IRS — Roth IRAs. 5-year holding period rule per IRC § 408A(d)(2); each conversion starts its own 5-year clock for the purposes of the 10% early withdrawal penalty exception on converted amounts.

Tax bracket and IRMAA values verified against IRS Rev. Proc. 2025-32 and SSA POMS, April 2026.

Get matched with a fee-only advisor who specializes in Roth conversion planning

Roth conversions at $1M+ IRA balances require coordinating tax brackets, IRMAA, Social Security, estate planning, and state taxes simultaneously. A fee-only advisor earns their fee on this analysis alone.