Roth Conversions for Single Retirees: Feeling the Painful 32% Bracket Jump
Episode 34
Roth Conversions for Single Retirees: Feeling the Painful 32% Bracket Jump
Published on May 6th, 2026
Episode Summary
Episode 34 of Retirement Tax Matters speaks directly to the high-net-worth single retiree, a cohort often overlooked in the broader financial planning conversation. For single filers in the $2M–$8M range, achieving significant wealth often means their career earnings rivaled those of a married household, yet they are impacted by higher tax bills due to the significantly tighter tax brackets for individuals. Garrett Crawford, CFP® analyzes why the $200,000 threshold for single filers is an important crosshair for advanced planning, where the jump to the 32% ordinary income bracket, the 3.8% Net Investment Income Tax (NIIT), and punitive Medicare IRMAA surcharges can collide to create an outsized tax burden. The discussion highlights how Required Minimum Distributions (RMDs) can turn a manageable 24% bracket into a 32% or more tax bracket reality in late retirement, necessitating a more tactical approach to Roth conversions. Furthermore, the episode explores how the geographic location of your beneficiaries, such as a child in a high-tax state versus a no state income tax state like Tennessee, and the total number of heirs inheriting your funds can dramatically shift the math of paying taxes today. By adopting a tax-return-driven planning process, single retirees can better optimize their lifetime tax bill and legacy.
Key Tax Planning Questions
Question 1: Are Roth conversions worth it for Single Filers?
Determining if a Roth conversion is worth the upfront tax bill requires moving beyond a simple calculator. For a high-net-worth single in the $2M–$8M range, not all Single Filer Retirees are created equal, and your specific life profile can dictate the financial planning that is a good fit.
A single filer who has never been married and has no children faces a unique objective: maximizing their own spending power or charitable impact. In this scenario, if you are charitably inclined, a Roth conversion may actually be counterproductive, as your Traditional IRA funds are the most efficient assets to leave to a 501(c)(3) organization tax-free. However, if you are a saver who prioritizes a legacy for children or grandchildren, the conversation shifts to the beneficiaries. You should consider the occupations and tax brackets of your heirs. Leaving a large Traditional IRA to a single child who is already a high-earner forces them to distribute those funds within a compressed 10-year window, often pushing them into a higher tax bracket. It makes sense to compare the tax rate you would pay versus what your beneficiary might be in. Also, do not estimate the impact of RMDs of a large multimillion dollar pre-tax 401(k) or IRA.
Life transitions also play a major role in the math. You may find yourself single due to a recent divorce or the loss of a spouse. In these cases, you are often realizing for the first time that your successful career earnings are now being taxed at tighter individual rates without the buffer of Married Filing Jointly brackets. If your single filer income is a little over $200,000 near the 32% Single Filer bracket the margin for error is slim.
Geography is another often overlooked facet of the decision. If you currently reside in a high-tax state but plan to move to a no-state-income-tax environment (e.g. Tennessee) within the next few years, waiting to execute a large Roth conversion may possibiiy save you a significant percentage in unnecessary state taxes. But this can be difficult to know timing the market, etc.
Ultimately, a Roth conversion can be a powerful tool for a single filer, but it requires a couple more reasons to double-check that the move aligns with your retirement goals.
Question 2: How does IRMAA impact a Single Filer thinking about Roth Conversions?
Income-Related Monthly Adjustment Amount (IRMAA) is often the most frustrating penalty for the retirees I serve. While married couples are often surprised to find they must pay increased Medicare premiums for both spouses, the single filer faces a different challenge: you reach these punitive thresholds much faster. For a high-net-worth single retiree in the $2M–$8M range, navigating these cliffs is a central pillar of annual Roth conversion planning.
To understand the tax implications, we must look at the current 2026 thresholds. While a single person in the 24% bracket earns between $105,701 and $201,775, their Medicare surcharges trigger much earlier. The standard Part B premium is $202.90 per month, but once your Adjusted Gross Income (AGI) exceeds $109,000, the surcharges begin. For a single filer with an AGI between $137,001 and $171,000, your total annual Medicare surcharge (Part B and Part D combined) materializes into approximately $2,886 extra per year. However, if a Roth conversion pushes your AGI income into the next tier ($171,001–$205,000), that surcharge jumps to approximately $4,620 per year.
It’s important to remember that IRMAA looks at your total AGI, which includes capital gains, interest, and dividends from your brokerage accounts. This level of compression is why we utilize precise tax planning software to model these outcomes. Sometimes, it makes sense to convert a slightly smaller amount to stay under a specific cliff; other times, the long-term benefit of reducing a future 37% RMD is so great that we choose to push through the surcharge today. The goal is to move from a place of guessing to a data-driven execution by navigating the following tax/penalty thresholds for Single Filers in 2025:
$200,000: Net Investment Income Tax (NIIT) 3.8% surtax on investment income begins.
$201,776: Ordinary Income Tax rate jumps from 24% to 32% (an 8% marginal increase).
$205,001: Medicare IRMAA Tier 5 surcharge of approximately $6,355 total annual extra premium triggers.
Question 3: I’m a 57-year-old single retiree and a former business owner. I was married for 11 years, but we did not have children. Currently, I have a Traditional IRA worth $3 million and a brokerage account worth $4 million, which holds the proceeds from my recent business sale after taxes were paid last year. I don't anticipate getting married again, and while I have a few nieces and nephews who will inherit whatever remains, my primary goal isn’t to leave a large legacy for them. Instead, I want to spend most of my assets and support several charitable organizations throughout my life. My home is paid for, and I have no outstanding debt. I anticipate my retirement spending will be around $200,000 per year, possibly slightly higher during these early years. Given this situation, should I be thinking about Roth conversions?
This is a good case study of a high-net-worth Single Filer Retiree where we have enough information to begin making some assumptions about whether a Roth conversion strategy makes sense or not. Since she is 57 years old, we must be aware of the rules related to her Traditional IRA. She must be 59 ½ to withdraw funds without a 10% early withdrawal penalty. She could utilizes a 72(t) distribution method, but my first inclination is that it may not be necessary in this specific situation.
Because her $4 million brokerage account is after-tax and is from a recent business sale, a large portion of that account is likely cost basis. This allows her to withdraw funds for her living expenses between now and age 59 ½ without touching the IRA and without adding much taxable income. This creates room to convert a portion of her $3 million Traditional IRA to a Roth IRA. We would explore using brokerage funds to pay the Roth conversion taxes. Would not want to do withholding from the Traditional IRA due to the 59 ½ rule rearing it’s head again.
The strategy requires monitoring the different Medicare IRMAA and NIIT thresholds while paying attention to the investment allocation within the brokerage account. This includes a discussion about her brokerage account and prioritizing long-term capital gains over ordinary income. Furthermore, since she intends to support charities, the Traditional IRA remains the most efficient asset to donate via Qualified Charitable Distributions (QCDs) once she reaches age 70 ½. So it would be important to factor in an estimate from this person about how much they could foresee giving away.
The long-term plan involves making educated guesses on spending needs, estate goals, and charitable giving to determine the aggressiveness of these conversions. We would also need to factor in how Social Security timing and if she planned on moving to a more or less friendly tax state for Roth Conversions.
This case is one where planning early in retirement makes a significant difference, and she would benefit from a tax-return-driven approach to her planning.
Full Episode Transcript
Adam: Good morning and welcome to Retirement Tax Matters. I'm Adam Reed. This is Garrett Crawford, our resident CFP® professional. How are we doing this morning, Garrett?
Garrett: Doing pretty good. Right out of the chute, I've been thinking a lot about state taxes this week.
Adam: Oh, that sounds exciting.
Garrett: Not totally related to what we're talking about today, but it's just been interesting as I've connected with some of our listeners and people that are watching. They're from all over the United States, and being from Tennessee, I think we're immunized from this idea of state taxes and we don't think about it as much. But I just notice all around the country how much state taxes influence where we live, how we spend our money, and for you all that are out there in those states with high state taxes, boy, it adds an extra level of planning, and it's just an interesting facet.
Adam: It's been funny being a Tennessean now my whole life. People are moving in here, and I lived in Cookeville a few years back, which is kind of like where Crossville's overflow goes now. There is a lot of retirement community there. We'd see people from California and New York, especially during the pandemic.
Garrett: Crossville is about the size of New York City, or a little bit smaller.
Adam: A lot of golf though, and that's all that really matters when you're headed for retirement. But a lot of people are coming into Tennessee, and I see different numbers all the time, but I think a big part of that is state taxes. So it makes sense. Well, we've seen a lot of comments these last few weeks and gotten a lot of really good ideas. One that we saw the other day that I thought was maybe more prevalent than I thought was, "Hey, don't forget about us single people." And I thought to myself, that's really important. One, because there's a lot of single people to begin with, but also two, half of your couple if you're married is going to end up probably single at some point for a time being.
Garrett: We have a lot of single clients.
Adam: Yeah, we have a lot of single clients. And then when spouses pass away, more single clients. It definitely is an important demographic. I think we're guilty of this, but also I see it online: "Oh, hey, just kind of chop everything in half and it's about right." And it's like, well, sometimes that's true and sometimes that's very not true. So, absolutely. I thought it might be a good idea today to help people navigate, "Hey, I'm a single filer. I'm thinking about RMDs, I'm thinking about Roth conversions. What should I be aware of, what should be on my mind as I come into those things?" What are we looking at today if we're talking more to the single filer? What's on our mind as far as tax pressure for them as they head into retirement or in retirement or maybe even on the tail end of their retirement, thinking more about legacy?
Garrett: Our niche that we're trying to communicate with here are people within that net worth of $2 million and $8 million. If you're a single person and you log into Schwab or Fidelity and you're seeing $4 million or $5 million, you're not a prototypical person that the tax code was written for. When I think of single people, I intuitively think they should earn about half as much as a married couple because maybe they're dual income. The tax brackets are written in a way where you get taxed more at a lower rate because you're not making as much money as two people that are living in a house together. I would take a guess that you've built that level of savings because you're a good saver, you were smart at your job, and you had a high income. So you're effectively the primary breadwinner of a single household. You're off the bell curve of normal. You're a single person that saved $4, $5, or $6 million in an IRA or brokerage account. What you find yourself positioned as is being punished for having a highly successful income, but you don't get the tax brackets of a married person. If you're between $2 and $8 million, you're probably looking at 32%.
Adam: Yeah, and I think it's interesting too because some of those marginal brackets can kind of be skewed as well, where different IRMAA thresholds... I think we're calling it the tax web. You've got the net investment income tax level. We've got the place where some of your qualified dividends phase out. We've got different tax brackets that are jumping up. How are you helping somebody think through this in a precise way?
Garrett: Some people out there are do-it-yourselfers and want to be educated. Other people, the type of people that usually work with us, don't want to spend their time navigating IRMAA, Net Investment Income Tax, and ordinary income rates. In 2026 for a single filer, you jump up from a 24% marginal income tax bracket to 32% at $201,776. So for every dollar basicially over $201,000, you're going to be taxed at 32%. The beginning of the 24% tax bracket is a taxable income of $105,701. If you've got between $2 and $8 million, my guess is you're going to be in that 24% to 32% tax bracket. Any additional income, like an IRA distribution to buy a new car, gets added to your taxable income. $201,000 is when you hit that 32% marginal tax bracket, which is a big jump and arguably a big pain point.
Adam: Real quick, I think a fun game to play this week is go down to the comments, your first car and how much you paid for it, and then your most recent car and how much you paid for it. I'd be interested to see the discrepancy there.
Garrett: Probably a big jump. So that's just federal income taxes. The other one is Net Investment Income Tax. If your adjusted gross income is over $200,000 as a single person, your qualified dividends, ordinary dividends, and capital gains can get hit with an additional 3.8% tax. And then the third one, if you're getting close to Medicare age, which is 65, you have to deal with what I'm quickly learning is the most hated feature of all retirement.
Adam: I hate it. And I'm not even there yet. It's the IRMAA surcharges. Everybody walks around the office all angry all the time.
Garrett: If you're a single person, these thresholds are lower than people that you know that are married. If your income, which includes Roth conversions, goes above $171,000, you're going to pay an extra $3,895 for your Medicare Part B premium. If you go over $205,000, you're going to pay $5,355 extra per year. When you hit that $200,000 taxable income number, you start seeing 32% plus 3.8% plus an additional Medicare IRMAA charge. On top of that, if your income goes over $545,000, you end up at 20% for long-term capital gains. If I'm a single high net worth retiree and I hear that, I'm like, oh boy. I wish somebody would've mentioned that five or ten years ago.
Adam: RMDs are coming. Maybe you are in the 24% bracket right now, but as you creep closer to 73 or 75, the government is going to start saying you've got to take that out. And even if you don't spend it, even if you reinvest it, the tax bracket is going to compound quickly. For that person in the 24% bracket with RMDs coming, that could put you into the 37% bracket. Does it make sense to look at Roth conversions at the 32% bracket?
Garrett: Go back and listen to Episode 33, talking about reverse engineering your RMD. Let's start 20 or 30 years from now. If you're thrifty and you don't spend a lot, that IRA that's $3 million is probably going to grow through retirement. We've got to figure out, is the game we're playing staying in the 32% bracket, or is the game you're playing hitting 37%? If you have a charitable cause, IRA money is the best money to go to charity. Don't pay tax on it. But if it's going to loved ones, the number of beneficiaries you have plays a big role. If it's in a pre-tax IRA, all of that money has to be distributed within 10 years. If your child is a successful doctor and also in a high tax bracket, leaving them a pre-tax amount might push them to the highest bracket. We also need to consider state taxes. If you are here in Tennessee, there are no state taxes on an inherited IRA, which is different than a child living in a high-tax state. Once you pay the taxes and move it to a Roth, and you don't have to think about future tax increases, I wouldn't overstate the peace of mind that comes from a Roth conversion.
Adam: Yeah, it's so individualistic. Connecting with you and making sure your goals and values align with how your money is being taxed is how you maximize things. I think maybe the last thing we'll touch on is somebody loses a spouse. How do you help somebody navigate that and remove the emotion from it?
Garrett: If you're going from married filing jointly to single, that's an incredibly difficult time to process. For this specific niche of people between $2 and $8 million, my hunch is you've got enough. I would want to pause and talk about the expenses they need. Life deals you cards, and you can't change your hand. This tax return driven financial planning process is the best way to solve this. What opportunities do we have today knowing what your 2026 or 2036 might look like? Let's have taxes not be the priority; let's move it to second or third place. If you're now going single and income is going to push you over the 35% level, let's go ahead and get some money out at 32%. Annual decisions and being aware of NIIT and IRMAA charges will help you end up okay.
Adam: Tax return driven financial planning is so important. Getting your tax returns and making projections Fine-tuning them in the fall has really served our clients. Absolutely, tax return driven financial planning is a huge key for single filers, whether that's a new thing on your plate or whether you've been single for years. It's a great place to optimize and make the most of what you've been given.
Garrett: I do a weekly newsletter and three key tax planning questions related to every episode. Single filers, I hear you. I will have examples in there for single people in the future. We're thinking about you as we create content.
Adam: Sounds good. I'm Adam Reed. This is Garrett Crawford. We're Retirement Tax Matters.