What is a Roth conversion stairstep?

A multi-year plan that converts traditional IRA or 401(k) dollars to Roth in increments calibrated to fill out the current marginal tax bracket without spilling into the next one. Each year you 'step up' to the bracket cap.

Why bracket-fill instead of one large conversion?

A single large conversion pushes the entire amount through the top marginal bracket and can trigger IRMAA Medicare surcharges and NIIT. Spreading conversions across years keeps each tranche at the lower bracket rate.

What is the IRMAA cliff?

Modified AGI thresholds (MAGI from two years prior) that trigger Medicare Part B and Part D income-related monthly adjustment amounts. Crossing a threshold by one dollar can cost over $1,000 per year per spouse.

Does the tool model state tax?

Yes — 15+ states are modeled, including states that fully tax Roth conversions and states that exempt retirement income partially or fully.

Roth Conversion Stairstep · Baratelli Institute

STAGE 1 OF 5

Your situation

Defaults are typical for a 62-year-old MFJ couple with $1.2M of pre-tax retirement assets, planning to retire at 65 and start RMDs at 75.

Your current age

Retirement age (income drops)

Year your wages stop. The "gap years" between retirement and RMD age are usually the cheapest years to convert.

Pre-tax retirement balance (Trad IRA / 401(k))

Total in tax-deferred accounts. Excludes Roth, after-tax, and HSA.

Expected annual return on pre-tax assets

Gross return; tax drag is calculated separately. Long-term equity-tilt: 6-7%; balanced: 5-6%; conservative: 4-5%.

RMD start age

Born before 1951: was 70½. Born 1951-1959: 73. Born 1960+: 75 (per SECURE 2.0). The longer the gap to RMD, the more conversion runway.

Filing status

STAGE 2 OF 5

Tax position during the gap years

The "income gap" between retirement and Social Security / RMDs is the cheapest conversion window. Tell me your expected ordinary income during those years.

Pre-conversion annual ordinary income (gap years)

Pension + part-time wages + interest + non-qualified dividends + RMDs already required. Excludes Social Security (modeled separately) and the conversion itself. Most retirees see this drop dramatically — that's why these are "gap years."

Annual Social Security (combined)

Taxable SS once started. Set 0 if delaying SS to age 70 (often optimal for high-earners). Up to 85% of SS is taxable above provisional-income thresholds.

State of residence

Will you be on Medicare during conversion years?

Why the income gap matters so much. Most retirees see ordinary income drop from $200K+ in working years to $30-80K in early retirement. That's the only window when you can convert at the 12% / 22% / 24% federal brackets instead of paying 32% / 35% / 37% later — when RMDs at age 75 push your income back up. Every year of unused gap-year capacity is permanent tax money left on the table.

STAGE 3 OF 5

Strategy: which bracket to fill?

You can convert as much or as little as you want each year. The standard approach is "fill the bracket" — convert just enough to push you to the top of a target federal bracket without crossing into the next one.

Target marginal bracket to fill

Most retirees target 22% or 24% MFJ. Below that bracket the conversion is even cheaper but won't move enough volume; above that the per-dollar cost rises sharply.

Respect IRMAA cliffs?

Medicare premium surcharges kick in at $206K MFJ ($103K single) MAGI thresholds with cliff jumps. Crossing a cliff costs $700-2,800/year in extra Medicare premiums, which counts as a hidden tax. If on Medicare during conversion years, set to "yes."

Who pays the conversion tax?

Critical: paying the tax from outside the IRA (taxable account) makes the conversion vastly more efficient — every dollar of converted Roth grows tax-free forever. Paying the tax from inside the IRA (withholding) shrinks the conversion immediately.

Conversion years (how many years to spread the conversions)

Auto-calculated as (RMD start age − current age) but you can override. Most retirees have 8-13 years of gap-year capacity.

The 5-year rule. Each Roth conversion has its own 5-year clock for tax-free withdrawal of converted principal (separate from the 5-year rule on Roth contributions and the qualified-distribution 5-year rule). For retirees over 59½ doing conversions, this is rarely an issue — but for early-retirees under 59½, it can prevent immediate access to converted funds. Plan accordingly.

STAGE 4 OF 5

Legacy & heir considerations

If your Roth balance passes to non-spouse heirs, they must drain it within 10 years (SECURE Act). Their tax bracket during the inheritance window is part of the calculus.

Expected heir's marginal bracket

During the heir's 10-year inheritance window. If heir is in peak earning years (typically children in their 40s-50s), they're often in 32-35% bracket — much higher than your retirement bracket. This makes Roth conversion vastly more efficient than leaving Trad IRA.

Likelihood Roth passes to non-spouse heir

If high (75%+), the heir's high bracket dominates the analysis — convert aggressively. If low (under 25%), spending most of the Roth in retirement, the analysis is more about your own bracket arbitrage.

Why heir-bracket arbitrage is the secret. If you convert at 22% MFJ and your heir would have inherited Trad and paid 35% on RMDs, every dollar converted saves 13 percentage points of tax — vastly more than your own bracket arbitrage. For high-net-worth families with heirs already in high brackets, Roth conversion can be the single highest-leverage tax move available, and the calculus often supports converting past the gap years into higher brackets.

STAGE 5 OF 5 · YOUR STAIRSTEP

Your year-by-year conversion plan

2025 federal brackets (MFJ shown)

Your target bracket is highlighted. Conversion math fills the target and stops.

Year-by-year stairstep

The lifetime comparison

Recommendations

PAIRS WITH

FO Reference Guide · EPD Guide · Liquidity Event Playbook

The FO Reference Guide chapter on tax-aware withdrawal sequencing covers the full retirement-distribution playbook (including coordination with charitable gifting, QCDs, NUA, and the SECURE Act inheritance rules). The EPD Guide covers the legacy side. Subscribe to the library →

FO REFERENCE GUIDE

The full retirement-tax playbook — by email.

Withdrawal sequencing, Social Security claim-age decision, QCDs, NUA, basis analysis, charitable giving sequencing, the inheritance side of SECURE 2.0, and the state-residency analysis for retirees.

Federal brackets reflect 2025 statutory amounts (and assume TCJA brackets sunset back to pre-TCJA levels in 2026 unless extended). IRMAA thresholds reflect 2025 amounts ($106K single / $212K MFJ first cliff). State tax assumptions are simplified — actual state retirement-income taxation varies materially (e.g., IL/PA do not tax retirement at all; some states partially exempt SS or pension income). The 5-year rule on conversions, NIIT mechanics on the conversion itself, and the interaction with Affordable Care Act premium tax credits (for pre-65 retirees) are not modeled in detail. This is not tax advice. Engage a CPA or CFP before executing any conversion plan. Roth conversion is irrevocable since 2017 — recharacterization is no longer available.

The Roth conversion every advisor talks about. Now with the actual math.