Roth conversion planning in Scottsdale, run on your actual numbers
How much to convert, in which years, and at what it adds to your Medicare premium two years later. Those answers come out of a projection built on your own return.
Unlike an IRA contribution, a Roth conversion gets no April extension. It counts in the calendar year the money leaves the traditional IRA. And since the 2017 tax law, a completed conversion cannot be recharacterized. There is no unwinding a December decision in March once the return shows what it did to your bracket, your Medicare premium, and the tax on your Social Security. The work belongs in October and November, with the year's income nearly known.
Converting wins only when today's rate beats tomorrow's.
A traditional IRA is a balance with a lien on it. You own the number on the statement minus whatever future tax law eventually claims. A conversion settles part of that lien early, at a rate you choose, in a year you choose.
That trade pays only when today's rate is lower than the rate the money would otherwise face. For a retired couple in the Valley living on cash and taxable dividends before Social Security starts, today's rate can be very low. For someone still drawing a paycheck, it usually is not.
Aaron Randak is a CFP® professional and a federally licensed Enrolled Agent. The projection, the conversion instruction at the custodian, and the return that reports it all stay with one person, so the strategy actually reaches the 1040.
What is a Roth conversion?
Moving money from a traditional IRA or 401(k) into a Roth IRA, paying ordinary income tax on the amount moved that year, so the balance and all future growth come out tax-free later.
There is no income limit on converting and no cap on the amount. Anyone with a pre-tax retirement balance can do it in any year, at any size. The constraint is arithmetic.
Converted dollars also escape required minimum distributions during your lifetime, which is why conversions do double duty as a retirement-income tool and an estate tool.
When is the best time to convert?
In the low-income years between the paycheck stopping and required distributions starting, which for most people is a window of roughly five to ten years.
Required minimum distributions now begin at 73 under SECURE 2.0, rising to 75 in 2033. Many people retire at 62 or 65 and delay Social Security to 70. Those in-between years often show the lowest taxable income of an entire adult life, and they are the cheapest years you will ever have to move money out of a traditional IRA.
| Life stage | Typical taxable income | Conversion case |
|---|---|---|
| Still working | Highest of your life | Rarely. Wages already fill the low brackets. |
| Retired, before Social Security | Often very low | The strongest window. Convert to fill brackets deliberately. |
| Social Security started, before 73 | Rising | Still workable, with the tax on benefits now in the math. |
| After required distributions begin | Higher, and mandatory | Narrower. The distribution has to come out first, then a conversion stacks on top. |
| Surviving spouse, filing single | Similar income, half the brackets | Usually the most expensive time. Convert before this, not after. |
A market decline is a second opening. Converting a depressed balance moves the same shares for less tax, and the recovery happens inside the Roth.
How does living in Arizona change the math?
Arizona's 2.5% flat income tax makes conversions cheaper here than in almost any state people move from, and Arizona does not tax Social Security benefits at all.
A conversion that costs 9% or more at the state level in California costs 2.5% in Arizona. On a $200,000 conversion that is a five-figure difference in state tax alone, on identical federal math.
For someone who has recently moved to Scottsdale, Fountain Hills or Sun Lakes from a high-tax state, the sequence matters as much as the size. Establishing Arizona residency before a large conversion year is worth planning deliberately rather than discovering after the fact.
Arizona also imposes no estate tax and no inheritance tax, so the estate case for converting rests entirely on federal rules and on what your heirs' brackets will look like inside their own ten-year window.
Will a conversion raise my Medicare premium?
It can, and the increase arrives two years later, which is why IRMAA has to be modeled before the conversion rather than discovered afterward.
Medicare Part B and Part D surcharges are set from your modified adjusted gross income from two years prior. A conversion in 2026 shows up in your 2028 premiums. The surcharge is a cliff, not a slope: one dollar over a threshold moves you into the next tier for the whole year, for both spouses.
The appeal form for a life-changing event will not help here. Work stoppage, marriage, divorce and the death of a spouse qualify. A Roth conversion does not. The only defense is sizing the conversion to land under the threshold in the first place, which takes a projection built before December.
What else does a conversion quietly push up?
Four thresholds move together with your income, and a conversion sized only against the tax brackets misses three of them.
- Taxation of Social Security benefits. Additional income raises provisional income, which can make a larger share of your benefit taxable. The effective marginal rate in that zone runs well above the bracket you appear to be in.
- The 0% capital gains bracket. Ordinary income stacks underneath long-term gains. Filling brackets with a conversion can push gains that would have been taxed at 0% up to 15%.
- The 3.8% net investment income tax. The conversion itself is not investment income, but it raises the modified income figure that decides whether your dividends and gains get hit.
- Medicare surcharges, on the two-year lag described above.
Should I pay the tax out of the IRA or from other money?
From outside money almost every time.
Withholding the tax from the conversion itself shrinks the amount that lands in the Roth, which is the entire asset you were trying to build. If you are under 59½, the withheld portion counts as a distribution rather than a conversion and picks up the 10% early withdrawal penalty on top.
Paying from a taxable brokerage account or cash keeps the full converted balance growing tax-free, and it quietly moves money out of a taxable account into a tax-free one at no extra cost.
What is the five-year rule on converted money?
Each conversion starts its own five-year clock. Withdrawing that converted amount before the clock runs out and before you turn 59½ triggers the 10% early withdrawal penalty, even though the tax was already paid.
Once you are past 59½, the conversion clock stops mattering for the penalty. A separate five-year rule governs whether the earnings come out tax-free, and it starts with your first Roth IRA of any kind.
For anyone converting in their fifties, the practical answer is to open a Roth IRA now, even with a small amount, so the earnings clock starts running while the question is still theoretical.
Why do advisors push conversions harder for married couples?
Because of what happens to the survivor. Income barely falls when one spouse dies, but the brackets narrow to single filing status and the Medicare thresholds roughly halve.
The pension continues at a survivor percentage, the larger Social Security benefit stays, the portfolio is unchanged, and the return goes from joint to single. The same money now runs through brackets about half as wide. Practitioners call it the widow's penalty.
Conversions done while both spouses are alive are done in the wider brackets.
Conversion planning across Scottsdale and the Valley
Golden Acre Wealth Management is a fee-only fiduciary registered investment adviser based in Scottsdale, Arizona. No commissions, no product sales, no account minimum. Conversion analysis is available as a standalone flat-fee project or as part of the ongoing advisory relationship.
If you moved to Arizona recently, bring the last return you filed in your former state. The residency timing usually matters as much as the conversion size.
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Golden Acre Wealth Management LLC is an investment adviser registered with the Arizona Corporation Commission (CRD #337930). Registration does not imply a certain level of skill or training. Advisory fees are described in full in the firm's Form ADV Part 2A, available on request or at adviserinfo.sec.gov; fees are negotiable. Client assets are held at independent qualified custodians (Charles Schwab and Altruist) in the client's own name. Golden Acre Wealth Management never takes custody of client funds. This page is general information about tax and retirement rules, not investment, tax, or legal advice, and it is not a recommendation for any person. Tax law changes and annual figures are indexed; confirm current-year amounts before acting. Estate work is coordinated with your attorney; Golden Acre Wealth Management does not draft legal documents or practice law. Past performance does not indicate future results. CFP® and CERTIFIED FINANCIAL PLANNER® are certification marks owned by the Certified Financial Planner Board of Standards, Inc., awarded to individuals who complete CFP Board's initial and ongoing certification requirements. Aaron Randak holds the CFP® certification and is a federally licensed Enrolled Agent; these credentials are held by him individually and not by the firm.