Why High-Income Earners Should Not Do Roth Conversions…Yet.
By Greg McCall, CFP® | Eagle Financial Planning
Roth conversions are one of the most talked-about moves in financial planning right now. You’ve probably seen the headlines, heard it from your advisor, maybe even read a few articles making it sound like a done deal. Convert now, pay taxes today, grow your money tax-free. Sounds great on paper. But that advice is almost always written for people who’ve already retired or are sitting in lower tax brackets. If you’re still working and earning $200,000, $300,000, or more per year, the math looks completely different.
I’m Greg McCall, a Certified Financial Planner and Founder of Eagle Financial Planning. Over the past six years, I’ve worked with pre-retirees managing millions of dollars in savings, and I’ve watched high income earners make costly Roth conversion mistakes because they followed generic advice that didn’t fit their situation. This post is going to walk you through why timing your Roth conversions around your income, not just your age, is what actually matters.
Why Tax Brackets Make Roth Conversions Expensive for High Income Earners
The standard Roth conversion pitch assumes you’re already in a lower bracket. That’s when it works beautifully. You pull money out of your traditional IRA or 401(k), pay a modest tax rate today, and let it grow tax-free from there.
But if you’re a married couple earning $250,000 a year, you’re already in the 24% federal bracket, and depending on your state, you could be looking at an effective combined rate closer to 30% or higher. Now add $100,000 in Roth conversions on top of that earned income, and you’ve pushed yourself even deeper into expensive territory.
It’s hard to look a client in the eye and tell them to pay 32% or 35% in federal taxes on a conversion when that same conversion, done a few years later in early retirement, might cost them 12% or 22%. That’s not planning. That’s following the herd.
The actual tax cost difference matters more than most people realize. A $100,000 conversion at 32% costs $32,000 in federal taxes alone. That same conversion in early retirement at 22% costs $22,000. That’s $10,000 saved on a single year’s conversion. Do that for three or four years and the savings compound into something serious.
The Hidden Tax Costs High Income Earners Face When Converting to Roth
Federal income tax is only part of the picture. When you’re earning W-2 income, you’re also paying FICA taxes. That means 6.2% for Social Security on wages up to $184,500 in 2026, plus 1.45% for Medicare on everything you earn. That’s 7.65% on top of your federal rate just for having a job.
High earners also face an Additional Medicare Tax of 0.9% on income above $200,000 single or $250,000 married. And if a Roth conversion pushes your modified adjusted gross income over those thresholds, you can trigger the Net Investment Income Tax at 3.8% on your investment income as well.
In my experience working with clients, this is usually the moment the conversation shifts. Most people hadn’t done the math on the full tax cost of converting while they’re still employed. They’d only been comparing income tax rates.
When High Income Earners Should Actually Do Roth Conversions
There’s a period in early retirement that I think of as your conversion window, and most pre-retirees underestimate how powerful it is.
It typically starts when you stop working, and it closes when your required minimum distributions begin at age 73, or 75 if you were born in 1960 or later. During this stretch, several things align in your favor. Your W-2 income is gone, so your taxable income drops sharply. If you haven’t started Social Security yet, that income isn’t in the picture either. And since RMDs haven’t started, you have full control over how much you pull from your accounts each year.
That control is the key. You can convert just enough to fill up the 12% bracket, or the 22% bracket, without spilling over into a higher tier. You’re not forced into a large conversion all at once. You can be surgical about it year after year, building a Roth balance at a fraction of the tax cost you’d pay today.
Waiting for those gap years before RMDs begin consistently preserves more wealth than converting during high-income working years, particularly for clients in the 32% and above brackets.
What High Income Earners Should Do Instead of Roth Conversions
If Roth conversions aren’t the right move during peak earning years, pre-tax contributions are. When you’re in the 32% bracket, every dollar you contribute to a traditional 401(k) saves you 32 cents in taxes immediately.
Max out pre-tax contributions now, grow the balance tax-deferred, then convert strategically in early retirement at lower rates. That sequencing is where the real lifetime tax savings happen.
A Three-Phase Tax Framework
This is how I frame the tax planning conversation with nearly every pre-retiree I work with.
Phase one covers your working years. Income is high, so the goal is deferral. Max out the 401(k), contribute to an HSA if your health plan qualifies, and resist the urge to convert. You’re in your highest bracket, so every dollar you defer is worth the most.
Put some numbers to it. A married couple both over 50, each maxing their 401(k) at $24.500 in 2026, is contributing $49,000 combined before taxes. At a 32% federal rate, that’s nearly $16,000 in immediate tax savings. That’s money that stays invested and compounds. Doing a Roth conversion on top of that income would cost them $32 per $100 just to move money from one account to another. It doesn’t pencil out.
Phase two is early retirement. This is the conversion window. Income has dropped, Social Security hasn’t started, and RMDs haven’t begun. You have the flexibility to fill up lower tax brackets each year with intentional Roth conversions, paying a fraction of what you’d have paid while working.
Here’s what that looks like in practice. Take the same couple, now retired at 62 and living off a taxable brokerage account. Their taxable income is around $60,000. In 2026, the top of the 22% federal bracket for married filers is approximately $211,400. That means they have roughly $150,000 of room to convert before hitting the 24% bracket. They don’t need to convert all of it at once. A $90,000 conversion at 22% costs them $19,800 in federal taxes. That same conversion while they were working would have cost $28,800 at 32%. That’s $9,000 saved on a single year’s conversion. String together seven or eight years of that before Social Security and RMDs arrive, and you’re looking at $60,000 to $70,000 in total tax savings just from the timing.
Phase three begins at RMD age. If you’ve been converting consistently during phase two, you’ve already reduced the balance in your traditional IRA or 401(k). Smaller balance means smaller required distributions. A couple who converted $600,000 over eight gap years and reduced their IRA from $2 million to $1.4 million will see their annual RMDs drop by roughly $22,000. At a 22% rate, that’s close to $5,000 less in taxes owed every single year, just from the work done in phase two. And the Roth balance they built carries no RMD requirement at all, which gives them real flexibility in how they spend and what they leave behind.
What This Looks Like With Real Numbers
I recently worked with a couple earning $350,000 a year who wanted to do a $150,000 Roth conversion right away. Before we ran the numbers, they assumed it was probably a good idea because they’d read several articles recommending it.
When we laid out their full tax picture, between federal tax at 32% and state income tax at 6%, they were looking at paying close to 38% in combined taxes on that conversion. Nearly $57,000 out the door just in taxes.
We put together a different plan. They’d retire at 62, live off their taxable brokerage account for a few years before starting Social Security, and begin Roth conversions once their income dropped substantially. With that approach, they’ll pay closer to 24% all-in on those same conversions. The difference is over $20,000 in savings on the exact same conversion amount.
That’s not hypothetical. That’s what intentional timing looks like in practice.
Getting the Timing Right
Roth conversion advice has to be specific to your situation. The general advice to convert as much as possible now skips over the most important variable, which is what rate you’re actually paying when you convert.
If you’re a high-income earner within a few years of retirement, the better question isn’t whether to convert. It’s when. And for most people in that position, the answer is not yet.
Waiting a few years doesn’t mean giving up on Roth conversions. It means doing them when they actually make financial sense for you, at a rate that reflects your lower retirement income rather than your highest earning years.
Frequently Asked Questions About Roth Conversions for High Income Earners
Can high income earners do Roth conversions?
Yes. There’s no income limit on Roth conversions. Anyone with a traditional IRA or 401(k) can convert to a Roth regardless of income. The question isn’t eligibility, it’s whether the timing makes financial sense given your current tax rate.
At what income level does a Roth conversion stop making sense?
There’s no hard cutoff, but for most married couples still working and earning above $200,000, the combined tax cost of converting with federal income tax and state tax, makes converting while employed significantly more expensive than waiting until early retirement when income drops. The math shifts at different thresholds for everyone, which is why running your actual numbers matters.
What is the best time to do a Roth conversion for high income earners?
The most favorable window is typically early retirement, after you’ve stopped earning W-2 income but before required minimum distributions begin at age 73 or 75. During those years, your taxable income is often at its lowest, which means you can convert at 12% or 22% instead of the 32% or 35% you’d pay while still working.
Do Roth conversions make sense if you’re still in a high tax bracket?
For most high income earners, no. Paying 32% to 35% in federal taxes now, on top of state taxes, to convert money you could convert later at 22% or lower is a costly timing error. There are exceptions, such as expecting permanently higher tax rates in the future, but those cases are less common than the general advice suggests.
What should high income earners do with their retirement accounts instead of converting?
Maximize pre-tax contributions to a traditional 401(k) and contribute to a taxable brokerage account. At a 32% bracket, every $1,000 contributed saves $320 in taxes immediately, and the full amount grows tax-deferred. Then, once you retire and your income drops, convert portions of that balance to Roth each year at a much lower rate. That sequencing is where the real lifetime tax savings accumulate.
How do Roth conversions affect the Net Investment Income Tax for high earners?
If a Roth conversion pushes your modified adjusted gross income above $200,000 single or $250,000 married, you can trigger the Net Investment Income Tax at 3.8% on top of your regular income tax rate. This is one more reason high income earners often pay a much higher effective rate on conversions while working than the headlines suggest.
Want to See Your Own Numbers?
If you’d like to map out your personal conversion timeline and see exactly how much you could save by waiting, I’d love to talk through it with you. I work with pre-retirees and retirees locally in Eagle, Idaho and virtually across the country as a fee-only, fiduciary planner.
You can book a complimentary Retirement Strategy Session. We’ll pull your specific numbers, walk through your tax picture from now through retirement, and figure out the sequence that actually fits your life.
And if you’ve found this helpful, my YouTube channel covers topics like this every week, built for people who want to understand their money before they retire, not after.
