Doing a Roth Conversion in 2026? Beware This Pitfall.

Core Insights - Roth retirement accounts, such as Roth IRAs and 401(k)s, provide tax-free investment gains and greater flexibility in retirement, as they do not require minimum distributions and allow tax-free withdrawals [1] Group 1: Roth Conversion - Individuals who missed direct contributions to a Roth account or have high income may consider a Roth conversion to benefit from tax-free growth [2] - A Roth conversion can lead to a significant tax bill in the year of conversion and potentially higher Medicare premiums in the future [3][4] Group 2: Medicare Implications - A Roth conversion can increase income above certain thresholds, resulting in income-related monthly adjustment amounts (IRMAAs) for Medicare premiums, affecting single filers with a modified adjusted gross income (MAGI) above $109,000 and married filers above $218,000 [5] - The thresholds for IRMAAs are relatively low, making it easy for a Roth conversion to trigger additional costs for Medicare premiums [5] Group 3: Caution and Strategy - Caution is advised when considering a Roth conversion due to potential tax implications and increased Medicare costs [6][8] - It may be beneficial to perform smaller Roth conversions over several years rather than a large conversion in one year, and consulting a tax professional is recommended to optimize timing and minimize tax impact [8]