Roth individual retirement account conversions jumped 41% in the first quarter of 2026 compared with a year earlier, a Fidelity Investments retirement analysis found.
The surge followed the One Big Beautiful Bill Act, which locked in lower federal brackets permanently and removed the sunset uncertainty that had frozen many conversion decisions.
An analysis from Charles Schwab warns that converting at the wrong time can erase years of compounding and leave retirement savings in worse shape.
The Tax Cuts and Jobs Act eliminated the ability to undo a Roth conversion made on or after January 1, 2018, meaning the decision is irreversible once funds move.
How a single Roth conversion can push you into a higher tax bracket
A Roth conversion transfers pre-tax retirement savings into a Roth account, where qualified withdrawals are tax-free after a five-year holding period under IRS rules.
The trade-off is that every dollar converted gets taxed as ordinary income in the conversion year, and large transfers can push income into higher brackets.
Hayden Adams, Director of tax planning and wealth management research at the Schwab Center for Financial Research, warned that a large conversion can require years of compounding just to recover the extra taxes paid.
“However, if the lump-sum conversion bumps you into a higher income tax bracket, it could take years of growth to make up for the extra tax hit, assuming you ever make up that lost ground,” Adams said.
The risk becomes concrete with 2026 bracket numbers from the Internal Revenue Service. A married couple filing jointly with $650,000 in taxable income sits in the 35% federal bracket, which caps at $768,700, Schwab showed.
Converting over $118,700 (the difference between $650,000 and the $768,700 ceiling) in a single year would push income past that ceiling and into the 37% rate on every additional dollar.
Three signals a Roth conversion would work against you
Schwab’s research identifies conditions in which a conversion is more likely to hurt, and all three center on financial readiness.
The first signal is that you expect to be in a lower tax bracket after you stop working.
The strategy collapses for people who will pay less tax on traditional IRA withdrawals during retirement than they would pay on the converted dollars today, the Schwab analysis noted.
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The second signal, the Schwab analysis noted, is that you cannot cover the tax bill without tapping retirement savings or emergency reserves.
A saver who converts $100,000 and withholds $22,000 from the balance for taxes only moves $78,000 into the Roth to grow tax-free.
Applying a 7% annual growth rate over 25 years, that $22,000 would have compounded to about $119,000 in forfeited tax-free wealth, Income Lab showed.
The final signal Schwab flagged is that you cannot afford to wait out the five-year holding period.
Each conversion starts its own five-year clock under IRS rules, and withdrawing earnings before the window closes can trigger ordinary income taxes plus a 10% early withdrawal penalty for savers under age 59½.
How Schwab’s bracket management approach limits the tax damage
Adams recommended a tactic Schwab calls tax bracket management as a safer alternative to a single large conversion for savers who still want Roth benefits.
Adams said the approach can be repeated annually, building a Roth balance in stages while keeping each year’s tax bill within a known and planned rate.
Bryan Strike, a Certified Financial Planner and Senior Director of Financial Planning at Mercer Advisors, noted that the years between retirement and the start of required minimum distributions at age 73 often present the best window for this graduated approach.
Adams identified one exception: savers already in the highest 37% bracket who expect to stay there may benefit from converting a larger sum to maximize tax-free growth time.
What the Roth conversion decision comes down to for your retirement
The Schwab analysis frames a Roth conversion as a tax-rate comparison that only pays off when today’s rate is lower than the future rate.
Catherine Valega, a Certified Financial Planner and Founder of Green Bee Advisory, has stressed that savers at every life stage need to understand where they sit in the federal brackets, advice that applies directly to irreversible moves like Roth conversions.
The Roth conversion coming out ahead depends on whether a saver’s current federal tax bracket is above or below the rate they expect to face in retirement.
Related: The tax rules that can quietly ruin your Roth IRA conversion strategy
