Call (214) 203-9192 — Roth conversion questions from Bay Area tech workers and retirees, answered remotely.
A Roth conversion done at the wrong time in California can cost you more than the same conversion done almost anywhere else.
That is the short version. The longer version is that a Roth conversion — moving money from a traditional IRA or 401(k) into a Roth IRA and paying income tax on it now — is a timing decision, and in the Bay Area the timing variables are unusual: some of the highest state taxes in the country, compensation built out of RSUs that vest in lumps, IPO years that spike income into the top brackets, and early retirements that create low-income windows most people never get. This page walks through how conversions work, what the 2026 tax landscape looks like, how California changes the math, and how Bay Area tech workers in particular should think about coordinating conversions with equity compensation. It is educational, not advice.
You move pre-tax retirement money into a Roth IRA, and the amount you move counts as taxable income that year.
There is no income limit on conversions — anyone with a traditional IRA, SEP IRA, SIMPLE IRA (after two years), or an old 401(k) can convert, regardless of earnings. Partial conversions are where most of the strategy lives: converting exactly enough to “fill up” your current tax bracket without spilling into the next one. The trade is straightforward to state and hard to get right in practice: you pay tax now at today’s known rates so that the money — and all its future growth — can come out tax-free later, provided the Roth’s holding rules are met. For the mechanics in full detail, see my full Roth conversion guide.
The federal rate structure is now permanent, which removes one big unknown from conversion planning.
| Rate | Single (taxable income) | Married filing jointly |
|---|---|---|
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | $12,400 – $50,400 | $24,800 – $100,800 |
| 22% | $50,400 – $105,700 | $100,800 – $211,400 |
| 24% | $105,700 – $201,775 | $211,400 – $403,550 |
| 32% | $201,775 – $256,225 | $403,550 – $512,450 |
| 35% | $256,225 – $640,600 | $512,450 – $768,700 |
| 37% | Over $640,600 | Over $768,700 |
The One Big Beautiful Bill Act, signed in July 2025, made the 2017 rate structure permanent — the top rate did not revert to 39.6%, which had been the scheduled outcome planners were modeling against for years. That permanence matters for conversions because the entire case for converting rests on comparing today’s rate against your expected future rate.
One hard deadline to know: a conversion counts for the tax year in which it is completed. If you want it on your 2026 return, it must be done by December 31, 2026 — there is no extension, unlike IRA contributions.
California’s top income tax rate is 13.3%, the highest state rate in the country, with an additional 1% surcharge on income over $1 million.
That changes conversion math enormously. A $200,000 conversion for a married couple in the 24% federal bracket costs $48,000 in federal tax — and roughly another $18,000 to $26,000 in California tax depending on their total income, because the conversion stacks on top of everything else and California’s brackets climb fast. The same conversion done after a move to Texas or Nevada would skip the state portion entirely.
This is why the single most valuable question a Bay Area resident can ask about a Roth conversion is not “how much” but “when, and where will I be living when I do it.” If a move out of California is on the horizon — common for Bay Area early retirees — it is worth modeling the conversion both ways: convert now as a California resident and pay the state tax, or wait and convert as a nonresident. What is certain is that converting a large amount while a California resident without modeling the state bite is how people overpay by five figures without realizing it. One caution: California’s Franchise Tax Board audits residency claims aggressively. If the plan involves moving first and converting later, the residency has to be real and documented — the tax savings are not worth a residency fight. For more on the state-by-state picture, see how states tax Roth conversions.
This is the part generic Roth conversion articles skip, and it is the part that matters most in San Francisco and San Jose.
RSUs — restricted stock units, the standard equity currency of Bay Area tech — are taxed as ordinary income when they vest, at federal rates plus California’s. A year with a large vest is a high-income year, which makes it a bad conversion year: the conversion income stacks on top of the vest income and gets taxed at your highest marginal rate. The strategy, such as it is, is to convert in the opposite years. The best conversion windows most tech workers ever get are the low-income years: between jobs, a sabbatical year, a gap year after early retirement before RMDs and Social Security begin, or the years after a move to a lower-tax state. In those years your marginal rate may be 12% or 22% federal instead of 32% or 35%, and the same dollars converted cost dramatically less in tax. The practical rule is simple to state: never convert in a year with a big vest or a liquidity event without modeling it first, and actively look for your low years — they are worth more than most people think.
Exercising incentive stock options can trigger alternative minimum tax, an IPO or acquisition year is almost always a peak-income year, and converting in that same year means paying top-bracket rates on the conversion. The years before a liquidity event — salary-only income, valuations still on paper — are often the cheapest conversion years a startup employee will ever see. None of this is automatic, and equity situations are genuinely complicated; the point is that the calendar of your equity should drive the calendar of your conversions, not the other way around.
This is the rule I repeat most often, because breaking it quietly destroys the strategy.
The tax on a conversion should be paid from cash, a taxable brokerage account, or other non-retirement funds — not withheld from the IRA being converted. If you are under 59½ and the custodian withholds 20% for taxes from the conversion itself, that withheld portion counts as an early distribution: income tax plus a 10% penalty on the withholding, and twenty percent less money actually making it into the Roth. Even after 59½, paying from the IRA shrinks the amount that gets into tax-free status, which is the entire point of the exercise. Before converting, confirm you have the cash to cover the tax bill — federal and California — from outside the retirement accounts. For the full walkthrough, see paying the tax on a Roth conversion.
Roth IRAs have two separate 5-year clocks, and they trip up more people than any other part of the rules.
The first clock governs earnings: for earnings to come out completely tax-free, the Roth IRA must have been open for five years (measured from January 1 of the year of your first contribution to any Roth IRA) and you must be 59½, disabled, or meet a narrow exception. The second clock governs conversions: each conversion has its own five-year waiting period, and withdrawing converted principal early while under 59½ triggers the 10% penalty. The practical takeaway: do not convert money you expect to need within five years, and track each conversion year’s clock separately. The detailed version with examples is in my breakdown of the two 5-year rules.
Medicare looks at your income from two years ago to set your premiums — and Roth conversions count as income.
This is the Income-Related Monthly Adjustment Amount, or IRMAA. For 2026, the first surcharge tier starts at MAGI above $109,000 single or $218,000 married filing jointly (based on 2024 income, per CMS):
| 2024 MAGI (single) | 2024 MAGI (joint) | Part B/month (2026) | Part D surcharge/month |
|---|---|---|---|
| $109,000 or less | $218,000 or less | $202.90 | $0 |
| $109,001 – $137,000 | $218,001 – $274,000 | $284.10 | $14.50 |
| $137,001 – $171,000 | $274,001 – $342,000 | $405.80 | $37.50 |
| $171,001 – $205,000 | $342,001 – $410,000 | $527.50 | $60.40 |
| $205,001 – $499,999 | $410,001 – $749,999 | $649.20 | $83.30 |
| $500,000+ | $750,000+ | $689.90 | $91.00 |
For Bay Area early retirees this creates a specific trap. Say you retire at 60 and do large conversions at 63 and 64 — those conversions set your Medicare premiums at 65 and 66, potentially adding thousands per year in surcharges for both spouses. The clean window is to finish heavy conversions by 62, so the lookback years are clear by the time Medicare starts. It is not a reason to avoid converting — it is a reason to schedule conversions with the lookback on the calendar. The full tier table and appeal rules are in my IRMAA’s two-year lookback piece.
Required minimum distributions now begin at 73 if you were born between 1951 and 1959, and at 75 if you were born in 1960 or later.
That starting age defines the conversion window: the years between retirement and RMD age are usually the lowest-income years of a retiree’s life — no salary, no RMDs yet, often before Social Security. For a Bay Area tech worker who retires at 58, that can be a 15-year runway of 12% and 22% bracket space to systematically move IRA money into Roth status before RMDs force large taxable distributions at 73 or 75. Every dollar converted in the window is a dollar that will not be forced out later at potentially higher rates, and will not inflate the income that drives IRMAA tiers. The window is the strategy; the conversion is just the tool. See when required minimum distributions begin for the age rules.
An honest page has to say this part out loud: conversions are not always smart.
Do not convert in your peak earning years if you expect to be in a lower bracket in retirement — paying 35% federal plus up to 13.3% California now to avoid 22% later is arithmetic that does not work. Do not convert if you cannot pay the tax from non-IRA funds. Do not convert money you will need within five years. Do not convert a large amount in a single year without checking whether it shoves you over an IRMAA cliff or into the next federal bracket — bracket-fill conversions across several years usually beat one big conversion. If you give heavily to charity, qualified charitable distributions after 70½ may accomplish more than conversions for the dollars you planned to donate anyway. And if a move out of California is coming, seriously consider waiting until you are a nonresident before converting large amounts — the state tax difference alone can fund years of the strategy. The best conversion plan is the one that survives contact with all of these constraints, not the one that ignores them.
The converted amount is taxed as ordinary income — federal plus California. A $100,000 conversion for a married couple otherwise in the 22% federal bracket adds roughly $22,000 in federal tax and roughly $9,000 to $11,000 in California tax, depending on total income. California’s 13.3% top rate is why timing and bracket management matter more here than in almost any other state.
In your low-income years — between jobs, a sabbatical, early-retirement gap years, or years with no major vesting. Avoid converting in years with large RSU vests, option exercises, or IPO liquidity events, because the conversion income stacks on top and gets taxed at your highest marginal rate.
Yes. Conversions count toward the MAGI that sets IRMAA surcharges, and Medicare uses a two-year lookback — 2026 premiums are based on 2024 income. For 2026, surcharges start above $109,000 single / $218,000 joint. Plan to finish large conversions by age 62 so the lookback years are clean when Medicare starts at 65.
Conversions have no income limit — the income caps apply only to direct Roth IRA contributions. (The “backdoor Roth” is a separate technique involving non-deductible contributions followed by a conversion.)
No, and you usually should not. Partial conversions let you fill up your current tax bracket each year without spilling into the next one — spreading a large conversion across several low-income years is the core of most conversion strategies.
Two clocks: earnings are only tax-free after the account has been open five years and you are 59½ (or meet an exception), and each conversion has its own five-year clock for the 10% early-withdrawal penalty if you are under 59½. Do not convert funds you will need within five years.
It is worth modeling both. Converting as a California resident means paying California tax on the conversion; converting after establishing residency in a no-tax state avoids it. The savings can be five figures on a large conversion — but the residency must be genuine and documented, because California audits these claims.
Yes. I serve Bay Area clients remotely — San Francisco, San Jose, and across the region — by phone and video. There is no San Francisco office; the work is done the same way for a client in Palo Alto as for one in Dallas. Call (214) 203-9192.
The math is personal: your brackets, your equity calendar, your state’s taxes, your Medicare timeline. If you are in San Francisco or anywhere in the Bay Area and weighing a Roth conversion — especially around RSU vests, a job change, or early retirement — call (214) 203-9192. I model the timing before anyone moves a dollar.
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