Is 2026 the Right Year for a Roth Conversion?
For investors with significant assets in traditional IRAs or 401(k)s, a Roth conversion is one of the most powerful — and most misunderstood — tools in long-term financial planning. It’s not right for everyone, and it’s not right every year. But April, with last year’s tax return freshly filed and the full year ahead still open, is one of the best times to evaluate whether it makes sense now. What a Roth Conversion Actually Does A Roth conversion moves money from a pre-tax retirement account — a traditional IRA, SEP IRA, or 401(k) — into a Roth IRA. The converted amount is added to your taxable income in the year of conversion, meaning you pay taxes on it today. In exchange, that money grows tax-free and can be withdrawn tax-free in retirement. Roth accounts are also not subject to required minimum distributions during the account owner’s lifetime, which gives considerably more flexibility in managing taxable income in later years. ¹ The core question is simple: will your tax rate be higher now, or later? If you expect to be in a higher bracket in the future, because of growing RMDs, a large inheritance, or anticipated tax law changes, paying taxes today at a known rate can be a sound trade. Why April Is a Natural Starting Point Evaluating a Roth conversion requires knowing where your income is likely to land for the year. In April, you have a complete picture of last year’s income and a reasonable sense of what this year may look like. That context matters enormously: the converted amount is stacked on top of your existing 2026 income, and converting too much can push you into a higher bracket or trigger Medicare IRMAA surcharges two years out. ² The retirement years before RMDs begin are often described as the optimal conversion window, a period when earned income has dropped but required distributions haven’t yet started, creating a lower-income stretch that may not last long.³ For clients in that window now, 2026 may represent one of the better opportunities in a multi-year conversion plan. What the Current Tax Environment Adds The tax legislation passed in July 2025 permanently extended the current seven-bracket structure and made rates that had been scheduled to expire a permanent feature of the tax code.⁴ That removes one source of prior uncertainty — the fear that rates might rise dramatically in 2026 due to expiring provisions — but it doesn’t eliminate the case for conversion. RMDs, Social Security taxation, and IRMAA surcharges remain powerful reasons for many retirees to consider reducing pre-tax balances over time, regardless of the broader rate environment. A Multi-Year Strategy Often Beats a Single Decision One of the most effective approaches is a systematic, multi-year conversion plan: converting just enough each year to fill the top of a target bracket, typically 22% or 24%, without spilling into a higher one.⁵ This approach spreads the tax cost across several years, reduces the risk of a single large conversion causing unintended consequences, and builds Roth assets gradually over time. There are also important considerations that can complicate the math: the pro-rata rule, which affects how taxes are calculated when you hold both pre-tax and after-tax IRA funds; the five-year holding period for converted amounts; and the interaction between conversion income and deductions that phase out at higher income levels.⁶ These are the kinds of details that make this a conversation to have with an advisor, not a decision to make in isolation. Bottom Line: A Roth conversion is a planning strategy. April provides the information and the runway to evaluate whether this year presents an opportunity. If you have significant pre-tax retirement assets, now is a good time to ask your advisor whether a conversion or the start of a multi-year plan belongs in your 2026 picture. Sources: [1] https://investor.vanguard.com/investor-resources-education/iras/ira-roth-conversion [2] https://www.sdocpa.com/roth-conversion-strategies/ [3] https://www.schwab.com/learn/story/why-consider-roth-ira-conversion-and-how-to-do-it [4] https://taxfoundation.org/data/all/federal/2026-tax-brackets/ [5] https://www.sdocpa.com/roth-conversion-strategies/ [6] https://www.fidelity.com/learning-center/wealth-management-insights/tax-deductions-and-Roth-conversions Disclosure Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice. Third-party entities, companies, and organizations that may be referenced on this page are not affiliated with Wedbush Securities or any of its affiliates. Opinions mentioned are that of the third-party and not of Wedbush Securities, the financial adviser and/registered representative, or any of our affiliates. Investment products involve investment risks including potential loss and are not insured by any federal agency, are not deposits or obligations of, or guaranteed by any financial institution and may involve loss of value. Past performance is not a guarantee of future returns. Any implementation of recommendations or investment strategies may generate fees, expenses, charges or commissions, based on the products and services. Any organization, company, individual, or third-party entity that are referenced on this page are not affiliated with Wedbush or any of its affiliates. The content on this page might not necessarily reflect the expertise of the investment professional and should be used for informational purposes only; the information provided on this page is not intended to be used as a recommendation of any kind, as it does not constitute an offer or advice. The insurance product or annuity is not a deposit or other obligation of, or guaranteed by, the institution or an affiliate of the institution and not insured by the Federal Deposit Insurance Company (“FDIC”) or any other agency of the United States, the institution, or (if applicable) an affiliate of the institution. In the case of an insurance product or annuity that involves investment risk, there is investment risk associated with the product, including the
What Your Tax Return Is Telling You About the Year Ahead
For most people, filing a tax return feels like the end of something. In reality, it’s one of the most useful planning documents you’ll produce all year. Once the return is filed, the numbers on it carry a clear message about what’s working, what needs adjustment, and where the year ahead may be heading. April is the right time to read it. What a Refund or a Balance Due Actually Signals A large refund might feel like a windfall, but it generally means too much was withheld from paychecks throughout the year — in effect, an interest-free loan to the government. A significant balance due, on the other hand, may signal that withholding or estimated tax payments were insufficient, which can result in IRS underpayment penalties. The IRS generally requires taxpayers to have paid at least 90% of their current-year tax liability — or 100% of the prior year’s tax (110% for those with adjusted gross income above $150,000) — in order to avoid an underpayment penalty.¹ For anyone who owed meaningfully at filing, adjusting withholding or setting up estimated payments now is far less costly than facing the same outcome again next April. Upholding Your Withholding After Filing For employees, withholding is controlled through Form W-4, which can be updated at any time by submitting a new form to your employer. The IRS Tax Withholding Estimator, available at IRS.gov, is a practical tool for calculating the right level based on your current income picture.² For retirees receiving pension income or Social Security, a similar form — the W-4P — allows for withholding adjustments from those income sources. For investors, business owners, or anyone with income not subject to withholding, quarterly estimated tax payments are the primary mechanism for staying current. The first estimated payment for the 2026 tax year was due April 15, making now the moment to establish a payment cadence for the remaining quarters.³ Use the Return to Look Forward, Not Just Back Beyond withholding, the completed return reveals other planning angles worth revisiting: Your effective tax rate and bracket position tell you how much room exists within your current bracket — useful context for decisions like Roth conversions, timing of investment gains, or additional retirement contributions later in the year. Investment activity from 2025 — realized gains and losses — may suggest whether a more deliberate harvesting strategy makes sense in 2026. If your 1099-B reflected larger-than-expected gains, a conversation with your advisor about managing taxable events going forward may be worth having. Retirement contributions reported on the return confirm whether you maximized available tax-advantaged accounts last year — and whether there’s an opportunity to do better this year while the calendar is still full. The One Big Beautiful Bill and What Changed for 2026 The tax legislation passed in July 2025 permanently extended most TCJA provisions and introduced several meaningful changes. The seven tax bracket structure remains in place, with 2026 thresholds adjusted for inflation. The standard deduction increased to $16,100 for single filers and $32,200 for married filing jointly.⁴ A new senior deduction of $6,000 applies to those age 65 and older, phasing out at higher income levels.⁵ And the SALT deduction cap rose significantly, to $40,000 through 2029, before returning to $10,000.⁶ These changes may affect whether itemizing makes sense this year and how income-related decisions should be sequenced. Bottom Line: Your tax return is more than a compliance document — it’s a roadmap. What it reveals about withholding, bracket position, and investment activity can meaningfully shape how this year unfolds. Now is the right time to review it with your advisor and turn last year’s numbers into this year’s plan. Sources: [1] https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty [2] https://www.irs.gov/individuals/tax-withholding-estimator [3] https://www.irs.gov/payments/pay-as-you-go-so-you-wont-owe-a-guide-to-withholding-estimated-taxes-and-ways-to-avoid-the-estimated-tax-penalty [4] https://www.fidelity.com/learning-center/wealth-management-insights/tax-deductions-and-Roth-conversions [5] https://www.fidelity.com/learning-center/wealth-management-insights/tax-deductions-and-Roth-conversions Disclosure Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice. Third-party entities, companies, and organizations that may be referenced on this page are not affiliated with Wedbush Securities or any of its affiliates. Opinions mentioned are that of the third-party and not of Wedbush Securities, the financial adviser and/registered representative, or any of our affiliates. Investment products involve investment risks including potential loss and are not insured by any federal agency, are not deposits or obligations of, or guaranteed by any financial institution and may involve loss of value. Past performance is not a guarantee of future returns. Any implementation of recommendations or investment strategies may generate fees, expenses, charges or commissions, based on the products and services. Any organization, company, individual, or third-party entity that are referenced on this page are not affiliated with Wedbush or any of its affiliates. The content on this page might not necessarily reflect the expertise of the investment professional and should be used for informational purposes only; the information provided on this page is not intended to be used as a recommendation of any kind, as it does not constitute an offer or advice. The insurance product or annuity is not a deposit or other obligation of, or guaranteed by, the institution or an affiliate of the institution and not insured by the Federal Deposit Insurance Company (“FDIC”) or any other agency of the United States, the institution, or (if applicable) an affiliate of the institution. In the case of an insurance product or annuity that involves investment risk, there is investment risk associated with the product, including the possible loss of value. Securities and Investment Advisory services are offered through Wedbush Securities, Inc. Member NYSE/ FINRA / SIPC