Roth Conversion Gap Years Strategy: Avoid IRMAA & Capital Gains Tax | 2026 Guide
When Should You Do Roth Conversions?
The "gap years" between retirement (ages 55-65) and claiming Social Security (ages 62-70), when your income is temporarily lower.
The logic sounds simple: “My income will be lower, so my tax rate will be lower. That’s the best time to convert.”
That can be true. But in real life, Roth conversions are rarely a simple “fill up a tax bracket” decision. They can change your cash flow, your Medicare premiums, and even the tax rate on your investment gains.
Below are the three big questions I want you to ask before you convert.
1. Do you have enough cash flow to live on during the conversion years?
Retirement often creates a “gap period”:
You stop working
You may delay Social Security
You may not want to start large portfolio withdrawals yet
If you don’t have enough liquid assets (cash, short-term bonds, or a planned withdrawal strategy), you may be forced to sell investments at a bad time just to cover living expenses.
In other words: Roth conversion is not only a tax decision. It’s a cash flow decision.
2. Can you pay the conversion tax with cash (without damaging the plan)?
A Roth conversion is generally taxable: the pre-tax portion you convert is added to your income for that year.
So the practical question becomes: where will the tax payment come from?
The best-case scenario is paying the tax from money outside the IRA (so you convert the full amount and keep the Roth growing). If the only way to pay the tax is by pulling funds from the IRA itself, the conversion may be less efficient.
Also important: Roth conversions are effectively permanent under current rules. You generally cannot “undo” a conversion the way you could before 2018.
3. Are you only looking at income tax, or also IRMAA and capital gains?
IRMAA: Medicare premiums can jump because of a conversion
IRMAA is the income-related surcharge that increases Medicare Part B and Part D premiums for higher-income retirees.
Two key points:
IRMAA is based on your MAGI (Modified Adjusted Gross Income).
Medicare looks back two years. For example, 2026 premiums generally use 2024 income.
A single large Roth conversion can push you into a higher IRMAA bracket. This is not “tax,” but it is a real recurring cost that hits your monthly budget. CMS publishes the standard Part B premium and deductibles each year (and the higher-income premium structure).
Capital gains: conversions can raise the tax rate on investment sales
Many pre-retirees use taxable brokerage accounts for spending, rebalancing, or large one-time purchases. Selling appreciated investments may create long-term capital gains.
Long-term capital gains have their own brackets (0% / 15% / 20%). Adding Roth conversion income can move you into a higher capital gains bracket than you expected.
And for some households, higher income can also trigger the 3.8% Net Investment Income Tax (NIIT).
This is why I often see people convert based on “my ordinary income bracket,” but later realize they didn’t model IRMAA or the tax impact on capital gains. That approach is not necessarily wrong. It’s just often not optimal.
Why “precision” is hard (and why it can matter)
To do this well, you typically need to model multiple years together:
spending needs and cash flow sources
how much you convert each year (and why)
how you pay the tax
IRMAA brackets and the two-year lookback
capital gains and NIIT
future RMDs
and, for many families, the next generation’s tax brackets (because inherited retirement dollars can be taxed at the heir’s rates)
When these pieces are coordinated, the long-term tax savings can be meaningful—especially for households with large pre-tax balances and high-earning heirs.
How we model this (RightCapital)
We use RightCapital for multi-year Roth conversion analysis. Its Roth conversion strategy can “fill up” chosen brackets and helps evaluate Roth conversions in the context of other tax planning variables.
Roth conversion in the “gap years” can be a powerful strategy.
But before you convert, don’t just ask:
“Is my tax bracket lower this year?”
Also ask:
“Can I support my spending without forcing bad sales?”
“Can I pay the tax efficiently?”
“Will this raise my Medicare premiums later?”
“Will this change the tax rate on my capital gains?”
“What is my next generation’s tax rate?”
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or investment advice. Tax and retirement planning is complex and varies based on individual circumstances. Please consult with a qualified financial advisor or other appropriate experts to develop a personalized plan suitable for your specific situation.
