What is Roth Conversion Smoothing and How Does a Multi-Year Approach Work?

Roth conversion smoothing is a deliberate, multi-year plan to convert traditional retirement accounts (IRAs, some 401(k) rollovers) into Roth IRAs in measured amounts instead of completing a single large conversion. Each conversion is taxable in the year it occurs, so spreading conversions over several years can keep taxable income below key thresholds that trigger higher marginal tax rates, Medicare Income-Related Monthly Adjustment Amounts (IRMAA), or increased taxation of Social Security benefits.

This article explains the mechanics, when smoothing makes sense, real-world considerations (including Medicare and the five‑year rules), sample scenarios, common mistakes, and a checklist you can use to discuss a plan with a tax pro or financial planner.

Important: This is educational information and not personalized tax or investment advice. Verify tax law and bracket thresholds with a CPA or IRS guidance before acting (IRS, Publication 590-A and 590-B).

Sources: IRS — Roth IRAs (https://www.irs.gov/retirement-plans/roth-iras); IRS Pub. 590-A/590-B (https://www.irs.gov/publications/p590a, https://www.irs.gov/publications/p590b).

Why smoothing matters

  • Taxable income from conversions can push you into a higher marginal tax bracket and increase the tax rate applied to ordinary income.
  • Higher reported income can raise Medicare Part B and D premiums (IRMAA) and increase the percentage of Social Security benefits that are taxed.
  • A single-year conversion may use up low-rate space that would otherwise be available for other tax planning (like capital gains placement, charitable deductions, or timing of Roth conversions themselves).

In my 15 years working with clients, the most common reason people convert too much in one year is emotion: a desire to “get it done” or to capture expected market gains. That can create avoidable tax and benefit shocks. A multi-year smoothing plan turns a one-time tax problem into a manageable multi-year decision.

Who should consider Roth conversion smoothing

  • Near-retirees and recent retirees whose earned income drops but who have large pre-tax retirement balances.
  • People with variable income who expect low-income years (e.g., early retirement between employment and Social Security) that can be used for conversions.
  • High-balance account owners concerned about future tax-rate increases or estate planning benefits of Roth accounts (tax-free growth for heirs).

When smoothing is less attractive

  • If you expect your tax rate to be materially lower in the future (e.g., you plan to be in a much lower bracket later), converting now can be suboptimal.
  • Short time horizon to needing cash: converting and then withdrawing converted funds within five years can trigger penalties.

Key rules and timing considerations

  • Taxation: Each Roth conversion amount is added to taxable income for the year of conversion (IRS: Roth IRAs). That increases your marginal tax liability and may affect phaseouts and credits.
  • Recharacterizations: You generally cannot undo a Roth conversion via recharacterization after 2017. Plan conversions carefully and consult IRS guidance or a CPA (IRS: recharacterizations).
  • Five-year rule: Conversions have timing implications. For distributions of converted amounts taken before age 59½, each conversion may be subject to a five-year waiting period to avoid a 10% penalty on the converted principal. For earnings to be tax-free, the Roth account generally must meet the five-year rule and a qualifying reason (age 59½, disability, or death) — see IRS Pub. 590-B.
  • RMDs: Required minimum distributions (RMDs) rules differ between traditional and Roth accounts. Roth IRAs themselves are not subject to owner RMDs, but converting while subject to RMDs requires careful sequencing (RMDs cannot be converted).

How to build a multi-year smoothing plan (step-by-step)

  1. Establish objectives
  • Are you targeting long-term estate planning, reducing future tax exposure, or lowering RMDs for a spouse? Define the primary goal.
  1. Map expected taxable income and thresholds
  • Project income sources for each year: wages, pensions, Social Security, capital gains, and expected distributions. Identify thresholds you want to avoid (higher tax brackets, IRMAA thresholds, net investment income tax (NIIT) thresholds).
  1. Determine the annual conversion “slice”
  • Decide how much to convert each year to stay inside your target thresholds. This is the smoothing “slice”. For example, converting an amount that fills the gap between projected taxable income and the top of a safe bracket.
  1. Run sensitivity scenarios
  • Model outcomes with different market returns, tax-rate changes, and timing of Social Security. Include worst-case and best-case scenarios.
  1. Monitor and adjust annually
  • Re-evaluate after major events: tax law changes, unusually large capital gains, or a switch in employment status.

Practical example (hypothetical)

A retiree has a $600,000 traditional IRA and expects modest pension income and small portfolio income in retirement. Rather than converting $600k in Year 1 (which could double-taxable income and push the retiree into a higher bracket and IRMAA phase), the planner recommends converting $100k–120k annually over five to six years.

Benefits shown by this approach:

  • Keeps taxable income below key Medicare or high-tax thresholds in most years.
  • Allows room to harvest lower-tax capital gains or bunch charitable contributions in particular years.
  • Spreads the tax cost, so yearly payments are easier to fund from non-retirement accounts.

Interaction with Medicare and Social Security

Roth conversions are taxable events and count as income for IRMAA and Social Security taxation calculations. Tactical conversion smoothing can be as much about avoiding a Medicare premium spike as it is about paying lower marginal tax rates.

For example, a single-year large conversion that pushes reported income above the IRMAA threshold for Medicare Part B could increase premiums by hundreds or thousands of dollars annually for several years. Because IRMAA uses a look-back period tied to your tax return, the premium impact can last beyond the conversion year.

State tax and other rules

State tax treatment of Roth conversions varies. Some states tax conversions differently or have different timing rules. Consider state income tax rates, state thresholds for Medicaid eligibility, and estate tax rules when planning conversions.

Common pitfalls and how to avoid them

  • Ignoring Medicare IRMAA thresholds: Model Medicare premium outcomes before converting large sums.
  • Forgetting the five-year rule: If you may need converted funds for living expenses within five years, be cautious to avoid penalties.
  • Overlooking tax interactions: Conversions can affect capital gains rates, phaseouts of itemized deductions, and NIIT exposure.
  • Over-conversion in low-income years without considering future increases: Don’t assume low-income years will last indefinitely.

Tools and professional support

A robust plan typically combines a tax projection tool, a retirement cash-flow model, and regular annual reviews with a CFP® or CPA who understands retirement taxation. I often run three baseline scenarios for clients: conservative (convert slowly), balanced, and aggressive (convert more early if we expect higher future rates).

Internal resources

Actionable checklist before you convert

  1. Project taxable income for the year and next 2–3 years.
  2. Identify Medicare IRMAA, NIIT, and Social Security thresholds.
  3. Pick an annual conversion amount that keeps you under those thresholds if possible.
  4. Confirm you have funds outside the retirement account to pay the tax (avoid using converted assets to pay conversion taxes unless you accept reduced Roth benefits).
  5. Talk with a CPA about estimated tax payments and withholding to avoid underpayment penalties.
  6. Review state tax consequences.
  7. Document the plan and revisit it annually.

FAQ highlights

  • Can conversions be recharacterized? No, recharacterization of Roth conversions was effectively eliminated for conversion transactions after 2017. Plan carefully and consult the IRS or a tax professional (IRS Pub. 590-A).
  • Do Roth IRAs have RMDs? Roth IRAs do not have owner RMDs, which can be an estate-planning advantage. Converting pre-tax accounts may reduce future RMDs on traditional accounts.
  • Will converting hurt eligibility for need-based programs? Potentially—higher reported income can affect Medicaid or subsidy eligibility. Coordinate with an advisor if you rely on need-based assistance.

Final thoughts

Roth conversion smoothing is a pragmatic technique to capture Roth benefits while managing tax timing risk. It’s especially valuable for those who anticipate long-term tax-rate parity or increases, want to shield future withdrawals from required distributions, or who need to avoid short-term spikes in Medicare premiums and Social Security taxation.

Because tax rules and thresholds change and individual circumstances differ, treat smoothing as a flexible plan that you review annually with a qualified tax advisor or CFP®.

Professional disclaimer: This article is for educational purposes only and does not substitute for personalized tax, legal, or investment advice. Consult a CPA or certified financial planner before implementing conversions.

Authoritative references

(Information current as of 2025; confirm specifics with IRS or your tax advisor.)