Introduction:

It's the most common piece of Roth conversion advice you'll hear from generalist planners: "You've got time. Spread it out over a decade. Stay in a low bracket." On paper it sounds disciplined. For some households, it really is the right answer.

For many others, it can quietly cost a large amount in what would otherwise be tax-free wealth. The only way to know which camp you're in is to actually run the math.

The Setup

Imagine a 63-year-old with $1 million in a Traditional IRA. Because they were born after 1959, required minimum distributions won't begin until age 75 — a twelve-year runway before the IRS forces taxable withdrawals. To keep the illustration simple, we'll model a ten-year horizon and apply a single hypothetical growth rate to both strategies.

For that rate we'll use 13 percent. As a reference point, the S&P 500's total return over the ten years through December 2025 ran in the low-to-mid teens — a strong decade by any standard. This is not a forecast; actual returns will differ and can be negative. The rate is used only to isolate one variable: the timing of conversions. Because both strategies below assume the same rate, the relative result doesn't hinge on it being 13 percent — only the size of the gap changes.

Strategy A: Convert Aggressively Over 3 Years

Convert approximately $333,000 per year for three years. Because the account keeps  compounding while you convert, three years of $333,000 conversions won't empty it — a residual stays behind and keeps growing. The goal is to move the large majority into the Roth early.

Strategy B: Convert Gradually Over 10 Years

Convert $100,000 per year for ten years. The Traditional IRA keeps growing while you chip away at it. By the end, some dollars have compounded tax-free for years and some have barely arrived.

Tax Brackets and Condemnation Proceeds

Currently, long-term capital gains are taxed in a tiered federal system, usually at a rate of 0%, 15% or 20% depending on the taxpayer’s filing status and tax bracket. Also, IRS guidelines may impose a tax on the net investment income for those in higher tax brackets, which adds to the effective rate. Finally, the timing of the proceedings may prove important. The receipt of a large award within one tax year can move a taxpayer into a higher bracket and raise the marginal rate applied to the gain. So, the final calculation of taxes depends on filing status, deductions, and other income.

Taxes at the state level are also contributing factors to the overall tax picture. In some states, capital gains are subject to ordinary income tax rates, while in other states they receive exemptions or special treatment. Situations involving multi-state income lead to further complications depending on the location of the property and the taxpayer’s primary residence.

Running the Numbers

By the end of year three, roughly $1.15 million sits inside the Roth — the amounts converted, plus growth on the dollars converted earliest. That balance compounds tax-free for the rest of the horizon. By year ten the Roth is approximately $2.67 million, alongside a remaining Traditional Not for distribution until approved. balance of about $720,000 that kept growing during and after the conversion years.

Total combined: ~$3.39 million. Tax-free portion: 79%.

Strategy B (10-year gradual conversion):

The Traditional IRA keeps growing at the assumed rate while $100,000 comes out each year. By year ten the Roth reaches approximately $1.84 million, and the Traditional has grown to about $1.55 million.

Total combined: ~$3.39 million. Tax-free portion: 54%.

Same Totals, Different Compositions

Both strategies land at essentially the same household total (about $3.39 million). The difference is where the money sits. Strategy A ends with roughly $830,000 more in the tax-free bucket. At a future tax rate of 24 percent, that's about $200,000 of tax on the converted amount alone; at 32 percent, closer to $265,000 — before considering the absence of required minimum distributions on the Roth, IRMAA surcharges avoided, and lifetime bracket relief.

What This Doesn't Account For

Accelerating means more income on the return in the early years, at higher marginal rates. A $333,000 conversion stacked on existing income can push a household well into the 32 percent bracket; a $100,000 conversion often stays in the 24 percent bracket or below. That extra tax cost is real — depending on the household, it might add $60,000 to $100,000 across the three-year window versus the slower path. Even after subtracting it, Strategy A leaves something meaningfully larger in the Roth and meaningfully smaller in the account that will be taxed for decades.

The Insight

This is not a recommendation that everyone compress conversions into three years. There are genuine cases where the slower path wins: when the current bracket is unusually low, when liquidity is tight, or when a household simply can't absorb a large tax bill in one year.

The point is narrower. The conventional advice — "just spread it out, stay in a low bracket" — is not automatically correct. It feels safe because it minimizes tax in any one year, but it can quietly cost a household a great deal in lost tax-free compounding. The earlier a dollar lands in the Roth, the more years it compounds with the IRS out of the picture.

So the real question usually isn't whether to convert — it's how quickly, and that answer is specific to your brackets, your liquidity, and your timeline. When did someone last model both paths for  your situation?

Disclosures

This material is for educational purposes only and reflects the views of the author. It is not tax, legal, investment, or accounting advice, nor a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment or tax strategy. Roth conversion strategies are not suitable for everyone and should be evaluated in coordination with qualified tax and legal counsel based on your individual circumstances.

The figures shown are hypothetical illustrations intended to demonstrate the effect of conversion timing. They are not a projection of future results and do not represent any specific investment. The assumed rate of return is hypothetical. Index returns are referenced for illustration only; indexes are unmanaged, cannot be invested in directly, and past performance does not guarantee future results. Actual results will vary and may be negative. Tax-bracket and tax-rate assumptions are illustrative and reflect 2026 figures, which are subject to change. Investing involves risk, including the possible loss of principal.

Johnny Borrelli is a Registered Representative of Realta Equities, Inc., Member FINRA/SIPC, and an Investment Adviser Representative of Realta Investment Advisors, Inc. Neither Realta Equities, Inc., nor Realta Investment Advisors, Inc., is affiliated with Tax Alpha Companies, including Tax Alpha Title and Tax Alpha Solutions. Realta Wealth is a trade name for the Realta Companies, co-located at 1201 N. Orange Street, Suite 729, Wilmington, DE 19801. Realta Equities and Realta Investment Advisors are trade names for the Realta Companies. The Realta Companies are Realta Equities, Inc., Realta Investment Advisors, Inc., and Realta Insurance Services, which consist of several affiliated insurance agencies.