2026-1027
Plan check
A Roth conversion, moved to November
The years between retirement and Social Security are often the cheapest time to pay tax. How the plan check sizes a conversion, and who decides.
Date
Time
08:05 ET
Account
401(k) → Roth IRA
Amount
$21,000
Status
Deferred
Checks passed
Wash-sale clear · Band rule · Liquidity floor · Tax bracket · Position cap · Trading window · Cost vs benefit
Signed by
Dana Okafor
CFP®
For many of our households, the cheapest years to pay income tax come right after one spouse stops working and before Social Security and required distributions begin. Income drops, but the 401(k) and IRA balances do not. Converting part of it to a Roth in those years means paying tax now at 22% instead of later, possibly at a higher rate, on money that will keep growing.
The plan check looks for this every morning from September to December, once the year’s income is mostly known. It estimates the household’s taxable income for the year, finds the room left before the top of the 22% bracket, and drafts a conversion that uses part of it, not all. For our example household this year, it found $26,400 of room and drafted a conversion of $21,000, leaving a margin for dividends that have not been paid yet.
A conversion cannot be undone, so the advisor’s review here is longer than for a rebalance. I check where the tax will be paid from, because paying it out of the converted amount wastes much of the benefit. I check Medicare premiums, which are set from income two years earlier and can jump past certain thresholds. And I ask the household, every time, because some of them would rather keep the cash.
Some years the answer is no conversion at all. The plan check drafts one; it is not a recommendation until an advisor has signed it and the household has agreed.