7 Roth Conversion Errors That Can Drain Retirees’ Savings

Many retirees who move money from a traditional IRA into a Roth run into rules that are unrelated to the conversion itself. Some of those missteps can trigger a tax bill that cannot later be reversed.

A Roth conversion is one of the few tax decisions retirees can still make from year to year, but it is also easy to mishandle. The biggest and most expensive mistakes usually stem from rules beyond the conversion itself, including how IRA balances are combined, Medicare premium thresholds, Social Security taxation, and timing rules with little room for correction. Here are seven costly errors, along with a sample situation and a way to avoid each one.

1. Missing the Pro-Rata Rule Can Make Taxable Money Seem Free

When the IRS calculates tax on an IRA distribution, it treats all individual retirement accounts as one and measures them as of the end of the calendar year (IRC Section 408(d)(2)). That means you cannot convert only after-tax dollars.

Hypothetical: Pat has $100,000 across traditional IRAs, including $20,000 of nondeductible basis, and converts $20,000. Step 1: $20,000 ÷ $100,000 = 20% of the conversion is tax-free. Step 2: $20,000 − ($20,000 × 20%) = $16,000 is taxable. The fix: Before converting, total every traditional, SEP and SIMPLE IRA balance you own, and keep track of your basis on Form 8606.

2. Having Tax Withheld From the Conversion Can Add Extra Cost for Younger Retirees

Any money withheld by the custodian never reaches the Roth. For anyone under age 59½, IRS guidance warns that a 10% additional tax may apply to the taxable portion, including the amount withheld, if it is not rolled over. Hypothetical: A 57-year-old converts $50,000 and has $10,000 withheld. That $10,000 is taxed as income and may also face the penalty. The fix: Pay the tax with cash held outside the IRA, and make estimated payments if needed to avoid an underpayment penalty.

3. Converting Before Taking the RMD Violates the Rules

Treasury Regulation 1.408A-4, Q&A-6, says the first dollars distributed during that year are treated as the required minimum distribution, and an RMD cannot be rolled over. If an RMD is moved into a Roth, it is treated as a regular contribution. Hypothetical: A retiree with a $15,000 RMD converts $40,000 in January. The first $15,000 counts as the RMD and does not qualify as a valid conversion. The fix: Take the full RMD first, then convert.

4. Moving Income Over an IRMAA Threshold Can Increase Medicare Premiums

The standard Part B premium is $202.90 a month in 2026. Joint filers with modified AGI above $218,000 and up to $274,000 pay $284.10, along with a Part D surcharge of $14.50. Hypothetical: A couple with $200,000 of MAGI converts $50,000. Step 1: $200,000 + $50,000 = $250,000, which lands in that bracket. Step 2: ($284.10 − $202.90) × 12 months × 2 spouses = $1,948.80 in extra Part B premiums at 2026 rates. The fix: Keep each conversion small enough to stay below a bracket cutoff.

5. Added Income Can Make More of Your Social Security Benefits Taxable

A conversion counts as income for all purposes, including the formula used to tax Social Security benefits. For 2025 returns, the joint-filer base amount is $32,000. Up to 85% of benefits can become taxable once half of benefits plus other income exceeds $44,000. Hypothetical: A couple receives $30,000 in benefits and has $10,000 of other income.

Step 1: $15,000 + $10,000 = $25,000, which is below the base amount, so none of the benefits are taxed. Step 2: Adding a $20,000 conversion brings the total to $45,000, above the 85% threshold. The fix: Run the Social Security worksheet with and without the conversion before choosing an amount.

6. Thinking a Conversion Can Be Reversed Leaves No Safety Net

IRS Publication 590-A says conversions made in tax years beginning after December 31, 2017, cannot be recharacterized, and IRC Section 408A(d)(6)(B)(iii) excludes conversions from the recharacterization rule. Hypothetical: A retiree converts $80,000 and then the market drops 20%. The tax is still owed on the full $80,000. The fix: Spread conversions over several years rather than doing everything at once.

7. Converting Too Much in a Single Year Can Push Income Into Higher Brackets

In tax year 2026, joint filers pay 22% on taxable income above $100,800 and 24% above $211,400. Hypothetical: A couple with $80,000 of taxable income converts $100,000. Step 1: $100,800 − $80,000 = $20,800 is taxed at 12%. Step 2: $180,000 − $100,800 = $79,200 is taxed at 22%. The fix: Aim to fill a target bracket each year. Converted amounts count as income in the year the funds are distributed or transferred, so the transfer must be completed by year-end. Where applicable, state income tax adds to the federal bill.

Decide Whether a Conversion Makes Sense Before the Year Ends

Conversions often make the most sense for people who are in a lower bracket now than they expect later, who can pay the tax from cash outside the IRA, and who have time for the Roth to compound. The period between a final paycheck and the first required withdrawal is often the most favorable window to convert. They often are not a good fit for:

• People who would need to use IRA money to pay the tax
• Retirees who are close to an IRMAA or Social Security limit
• Anyone who expects to be in a lower bracket later or plans to leave the IRA to charity
• People who will need the money within a few years

Roth IRAs do not require distributions while the owner is alive, which can help with estate planning. That advantage only works if the tax impact was understood before the account owner signed the conversion paperwork.