Evaluating the 22% to 24% Tax Bracket Jump for Strategic Roth Conversions for High-Net-Worth Retirees.
Episode 31
Evaluating the 22% to 24% Tax Bracket Jump for Strategic Roth Conversions for High-Net-Worth Retirees.
Published on April 15th, 2026
Episode Summary
Episode 31 of Retirement Tax Matters analyzes the strategic logic of maximizing the 24% federal tax bracket for high-net-worth retirees who naturally fall into the 22% range due to modest spending. Garrett Crawford, CFP® explains that many $2M–$8M retirees find themselves in an income situation where low lifestyle expenses mask the growing tax liability of large traditional IRAs or pre-tax employer retirement plans. The conversation details how potentially accelerating future income into the currentyear (via Roth Conversion) at an extra 2% in marginal tax today can sometimes help act as a defensive barrier against the six-figure RMDs that often push retirees into the 32% bracket during their 80s. Strategic Roth conversions are evaluated against Medicare IRMAA thresholds, noting that during pre-retirement before age 65 can allow for a unique insulation period to accelerate income without premium surcharges. The episode emphasizes using a spring income projection to identify these opportunities well before the EOY December 31st deadline, protecting against the Surviving Spouse Tax Shock and moving beyond immediate tax minimization toward lifetime optimization.
Key Tax Planning Questions
Question 1: Why convert at 24% if my current tax bracket is 22%
One of the more effective ways to control your lifetime tax bill is through proactive modulation of your taxable income. In the world of high-net-worth retirement planning, this typically involves a tactical choice: accelerating future income into the current year through a Roth conversion or deferring income into the future to minimize today's liability. While life is more unpredictable than we would like to admit, for a retiree with a portfolio between $2 million and $8 million, there are seasons where the odds strongly favor playing offense.
For a married couple in 2026, the 24% federal tax bracket provides a massive planning runway, extending up to $403,550 in taxable income. Moving from the 22% to the 24% bracket is a 2% decision that many of my clients find to be a worthy trade-off for the control and peace of mind it provides. I have likened the feeling of a strategic Roth conversion to paying off your home mortgage. Just as many rarely regret owning their home outright, I’ve not experienced a retiree who regretted doing a calculated Roth conversion while rates are at historically low levels.
By intentionally filling the 24% bracket now, you are chipping away a future (potentially large) Required Minimum Distribution (RMD) that could be coming your way. As your tax-deferred accounts grow through compound interest, your future RMDs could easily push a high-net-worth retiree between $2M-$8M into the 32% bracket—an 8% jump from 24% to 32% compared to the 2% difference you face today. Furthermore, under the SECURE Act’s 10-year rule, a Traditional IRA can become a significant tax burden for your children, whereas an inherited Roth IRA offers them a simple, tax-free legacy.
Question 2: Won't my taxes be lower in retirement?
In my first year as an investment advisor, we had a client in his 80s who shared a perspective that has stuck with me for over a decade. He told me that his entire life, people had promised his taxes would be lower in retirement, yet he found himself paying more in taxes as a retiree than he ever did as a working person. Even then, I knew better than to assume his experience was a black or white issue. However, hile his experience isn't universal, it is a very common reality for the high-net-worth savers this blog is designed for. If you have spent decades diligently contributing to a company pre-tax 401(k) and living below your means, the traditional logic that you’ll have lower taxes in retirement resides on shaky ground.
For a saver with a $2 million to $8 million portfolio, your marginal tax bracket is no longer just about what you choose to spend. It is increasingly driven by the growth of your assets. If you’re like many of our clients, you have experienced market volatility where a single day of gains exceeds what you used to earn in an entire year of work. As these tax-deferred accounts balloon, so does the future tax liability owed to the IRS. By the time you reach your late 70s to mid-80s, a six-figure RMDs might catch you by surprise that can easily push you into a higher tax bracket than you occupied during your career.
In my early years in the industry, I viewed the 22% and 24% tax brackets as a no man's land for Roth conversions, wondering if the immediate tax hit was worth the long-term benefit. However, with more experience working with Retirees, I’ve realized that for disciplined savers, these brackets can represent a strategic opportunity for lifetime tax management. Moving from the 22% to the 24% bracket is a 2% decision that acts as a hedge against future tax increases and the a surviving spouse being hit with higher taxes when moving to single filing bracket. Paying some additional tax today (2%) for permanent tax-free growth can be a prudent way to reduce the risk of a much larger tax bill for you or your heirs down the road.
Question 3: My spouse and I are 54 and planning an early retirement. We both have worked our entire lives and together have a very large pre-tax 401(k) balance because we spent much less than we earned. We were concerned about saving taxes that we realize we should’ve been doing more Roth. If we only anticipate needing about $10,000 a month to live on in retirement and our Social Security will eventually cover a large chunk of that, does it make sense to start aggressively converting our 401(k) to a Roth IRA up to the 24% tax bracket now while we are still in our 50s, especially since we realize much of this money will likely go to our children?
While it may be tempting for this couple to course correct up to top of the 24% bracket, their age introduces unique hurdles that could make an aggressive conversion strategy counterproductive.
The 59 ½ Withholding Trap One of the primary pitfalls for early retirees is the liquidity requirement for Roth conversion taxes. If your assets are primarily housed in a pre-tax 401(k) and your cash flow is tight, you might consider withholding the tax directly from the conversion. However, if you are younger than 59 ½, the IRS treats that withheld amount as an early distribution. This triggers a 10% federal penalty on the withheld portion, effectively turning a 24% tax rate into a 34% burden. For many, it is more prudent to wait until you can access via Rule of 55 or reach age 59 ½ when you can pay those taxes more flexibly.
The ACA Subsidy Cliff If you plan to utilize the Affordable Care Act (ACA) marketplace for health insurance before age 65, your premiums and eligibility for subsidies are tied directly to your Modified Adjusted Gross Income. A small or large Roth conversion in your 50s might spike your reported income enough that it could cause you to have to pay back a significant multi-thousand dollar health insurance subsidies. In this early retirement window, the cost of your health insurance must be factored into the actual net cost of the Roth conversion.
The Long-Term Legacy Trade-off Despite these short-term obstacles, your desire to protect your children from a future tax liability is valid. Under current rules, your heirs would have to fully distribute and pay taxes on an inherited Traditional IRA within a 10-year window. If you can pay 24% today using outside funds like a taxable brokerage account, you are creating a tax-free growth account for the rest of your lives and an additional 10 years for your children. The goal is to identify the precise sweet spot through an annual tax projection that maximizes your legacy without triggering unnecessary penalties or increased taxes later in life.
Full Episode Transcript
Adam: Good morning and welcome to Retirement Tax Matters. I'm Adam Reed, and this is Garrett Crawford, our resident CFP® professional. How are we doing this morning, Garrett?
Garrett: Doing pretty good. Today the Masters starts. By the time this releases, we'll know who the winners are, but I'm ready for those birds to chirp in the background. They do the pan across the azaleas at Augusta National. For me, spring has officially started when the Masters is on, so I'm excited about watching that.
Adam: It’s funny, you would think CPAs might have lobbied for moving it back a weekend so they can enjoy the festivities. I saw a buddy yesterday at a networking event and asked where one of our referred CPAs was. They said he was nose to the grindstone. My dad and brother are both CPAs, so I don't think they'll be enjoying the Masters as much as we are.
Garrett: It’s the one week of the year that Adam and I both have the TVs on in our offices. We're both sports guys, but even if you aren't following the game, it’s a better screensaver than Microsoft or Mac. It’s beautiful there. If anybody out there has strings to pull, I've entered the Masters lottery for seven or eight years and still haven't won. One day we'll have to do a guest episode of Retirement Tax Matters at Augusta National.
Adam: Garrett wrote me in last year and said if I got the tickets, he’d pay and we'd go. So, I signed up.
Garrett: We hired Adam just so we'd have one more extra chance at getting to Augusta, but I'm looking forward to that this week.
Adam: I think the topic for today should be a lot of fun. It double clicks on something people have been thinking about as they follow us. We talk a lot about Roth conversions; we’re big fans when it’s the right place and right time. But for many people we work with in the $2 million to $8 million space, the reason they are in that position is because they lived within their means and saved well. Now they have healthy Social Security, maybe a pension, and they’re still living within their means in the 22% tax bracket. It feels like a no man's land because they don't want to convert up to 24%, they’ll never be down in the 12%, and they certainly don't want to touch 32%. How do you help clients think through the 22% and 24% tax brackets?
Garrett: Let’s start with the niche group we work with: people where retirement is on the horizon or who recently retired with a net worth between $2 million and $8 million. We pick those numbers because they are often below federal estate tax levels, but high enough that your retirement process is very different from your coworkers. You’ve likely saved more than your peers, but that doesn't necessarily mean you have high income or an extravagant lifestyle. High-net-worth retirees often got that way because they lived on less than they earned. It can actually be a psychological issue where you aren't used to spending.
Oftentimes, these retirees have expenses that put them in the 22% or 24% tax bracket. No man's land is the perfect term. You’ve likely been in a similar bracket for a long time and think if you play your cards right, you’ll never see the 30s. You plan to use tax-deferred IRAs and 401(k)s, hoping your retirement tax level will be lower than your working level. But because of your net worth, you will find yourself in these brackets. If you are in the 22% bracket, the next jump to 24% is only an additional 2%.
In 2026, for married filing jointly, the 22% bracket starts at $100,801 and goes to $211,400. The 24% bracket goes from there up to $403,550. Many people in our niche have income between $125,000 and $250,000. If your income is at $250,000, you can go all the way to $400,000 while staying in the 24% bracket. That is only a 2% difference to consider taking advantage of. For single filers, 22% starts at $50,401 and 24% starts at $105,701.
Adam: We almost need to take a psychology class because so much of this is about the psychological makeup of clients. At my old firm, I had a client with $42 million in a brokerage account. It wasn't inherited; he was a surgeon who saved everything. They lived on almost nothing. He was in his 70s and still working, and his wife asked me with a straight face, "Do you think we'll have enough money?" I told her, "You have too much money!" But that’s how it feels. People who lived below their means wonder if spending or converting is okay. How does spending too little cause landmines in tax planning?
Garrett: I’ve seen cases with high achievers where spending money goes against everything they’ve practiced. They might have $3 million but only take $3,000 a month to supplement Social Security. Meanwhile, compound interest is growing that account at 7% or 8% per year. Spending doesn't match the growth. It becomes non-intuitive.
If you have a high net worth and your income is in the 22% or 24% bracket, and you only take the minimum from your IRA, those accounts continue to grow for 15 years until RMDs (Required Minimum Distributions) begin. We call it the six-figure RMD. By the time you're in your 80s, you lose control of the tax situation. Between Social Security and a six-figure RMD, you get pushed into the 32% tax bracket. Moving from 24% to 32% is an 8% jump. Foresight suggests that maxing out the 24% bracket now, which is only 2% more than the 22% bracket, is a very defensible strategy.
Adam: Another landmine people try to avoid is IRMAA charges—paying more for Medicare. I recently had a client focused on legacy, where a Roth is favorable. Even though she was at the bottom of the 22% bracket, we did a larger conversion and pushed through an IRMAA threshold. The first level isn't a huge hit, but the third and fourth levels get expensive quickly. How do you think through those thresholds?
Garrett: If you’re considering Roth conversions, heed this: the Medicare IRMAA thresholds are not perfectly aligned with the 22% and 24% tax brackets. They are staggered. Often, our goal is to max out the 24% bracket, but we stop short because of a punitive IRMAA threshold. If you aren't careful, you’ll get a letter two years later increasing your premiums. Even if you can stomach the cost, nobody likes paying more for Medicare than their friends. It’s a penalty that stings.
However, there’s a silver lining. If you are under 65 or have delayed Medicare because a spouse is still working, IRMAA doesn't apply to you yet. This insulation provides a great opportunity to max out the 24% bracket without the Medicare penalty.
Adam: This is where I mention our free resources. How can someone use our Year-End Tax Planning Checklist to be an opportunity identifier if they are in the 22% to 24% range?
Garrett: Go to retirementtaxmatters.com. We believe in Advanced Tax Planning, which means doing the work well before the December 31st deadline. When you get your return back from your CPA in April, the most important thing you can do is make an income estimate projection for where you will end up in December. If you can’t do it yourself, hire someone. This estimate tells you how much future income you can accelerate from an IRA or 401(k) to max out these lower brackets. We often identify the opportunity in April but wait until October to execute the Roth conversion because life is unpredictable.
Adam: Check out that free resource in the description. It boils down everything we talk about into a usable checklist. Garrett, any final thoughts?
Garrett: Everyone’s situation is unique. There are cases where I don't recommend a Roth conversion, especially if there isn't much money left over for beneficiaries. But for most high-net-worth retirees in that $2 million to $8 million range, thinking your taxes will naturally drop to 12% is often a misconception. Walk through the tax planning process to see if it’s a fit.
Adam: We'll call it quits there. Thanks for listening on Apple, Spotify, or YouTube. Like, subscribe, and download the free resource. I'm Adam Reed, he's Garrett Crawford, and this is Retirement Tax Matters.