Roth Conversion with a Military Pension: Year-by-Year Amounts (a Walkthrough from First Premier Bank)

Which income does a conversion stack on?

Military retired pay and a second-career pension, such as a trooper pension, are ordinary income and count first, so every converted dollar is taxed on top of them at your highest rate. VA disability compensation isn't taxable and isn't part of MAGI, so it doesn't push a conversion into a higher bracket.

The IRMAA test uses MAGI, which is AGI plus tax-exempt interest. Pensions, conversions and taxable Social Security all count. Medicare uses a two-year lag, so the Part B premium you pay at 65 depends on the income you report at 63. For 2026 the standard premium of $202.90 a month applies up to $109,000 of MAGI single or $218,000 joint, according to the Centers for Medicare & Medicaid Services.

Two other thresholds sit nearby. Before 65, conversion income can shrink a marketplace premium tax credit. After Social Security starts, it can make more of the benefit taxable, which the SSA and IRS rules spell out. Some states exempt military retired pay but tax conversions, so look up how your state treats each one before you count on the savings.

Your accounts, checked in due-date order

Before any amount gets picked, run your own accounts against this list. Each line has one thing to look up, and most of them are in a letter you already own.

The first moves go in a fixed order. Step 1: confirm both pension start dates. Step 2: project each year's income up to 75, the RMD age for anyone born in 1960 or later. Step 3: ask the TSP and the 457 plan whether they convert inside the plan; if not, conversions happen in an IRA after a rollover, which has its own page on this site. Step 4: set the first year's amount in December.

Three timing errors cost people. Converting too early, while you're still drawing a trooper salary at a higher rate, pays tax at today's top rate for no gain. Converting too late, after 75, means the RMD must come out first and can't be converted. Converting out of order, before you know the date retired pay starts, means the amount is a guess.

Each task has an owner and a due date, and First Premier Bank sets the amount only after the year's income has been laid out line by line.

The first four moves

• Traditional balance: add the traditional money in the TSP, the 457 and any IRA.
• Pension start dates: the trooper pension date and Guard retired pay at 60, both taken from the benefits letters.
• Cash for the tax cost: outside savings that can pay it without touching the IRA.
• Age 59½: the date you reach it, because tax withheld from a conversion before then counts as an early distribution with a 10% additional tax.
• Medicare test year: the year you turn 63.

How much can Wade convert before IRMAA bites?

Wade can convert $40K a year at ages 55 to 59 and $35K a year at 60 to 66, which keeps MAGI at $104K from 63 on, under the $109K single IRMAA tier. Over 12 years that moves $445K into Roth at a $97,900 tax cost, assuming 22%.

Hypothetical: Wade leaves the trooper job at 55 with a $45K-a-year pension. Guard retired pay of $24K a year starts at 60. He files single in this illustration and holds $600K of traditional TSP and 457 money. At 55 to 59 he converts $40K a year, a tax cost of $8,800 each year (22% of $40K), paid from cash. At 60 to 66 his pensions total $69K, so he converts $35K a year, a tax cost of $7,700. The totals: $200K plus $245K is $445K in Roth, and $44,000 plus $53,900 is $97,900 of tax paid.

The room is widest at 55 to 59, narrows at 60 when Guard retired pay starts, and narrows again at 67 when Social Security begins, so he recomputes then. Before the change he holds $600K traditional and $0 Roth. After it, ignoring growth, he holds $155K traditional and $445K Roth, so RMDs at 73 are figured on far less.

A conversion of $70K at 63 adds no Medicare cost that year, because Wade isn't on Medicare yet. It still doubles that year's tax cost, to $15,400 at 22%. The larger cost comes two years later. The conversion lifts MAGI from $104K to $139K, so at 65 his Part B premium is $405.80 a month instead of $202.90. That is $2,434.80 more for the year using 2026 figures, plus a Part D surcharge (check the current figure). Our calculator runs these numbers on your own pensions.

At 22% now against perhaps 22% later, a conversion mostly prepays tax. The real saving comes from staying out of IRMAA tiers, from having no lifetime RMDs on Roth money, and from paying the tax cost with outside cash so more stays sheltered. Roth money is still invested and can drop below what was converted.

The ceiling from 63 on

Shift or save?

What if the market drops after I convert?

A conversion can't be undone, so if the account falls 20% the week after, you still owe the tax cost on the higher value. On a $35K conversion at 22% that's still $7,700, even if the money is now worth $28K.

Leave room for that, and for health costs or a change in the law, by converting in December once the year's income is known, keeping $5K under the IRMAA tier, and deciding again each year with that year's numbers.

The yearly conversion number at First Premier Bank

Each fall, First Premier Bank lays out the year's income line by line and writes the conversion amount and its due date into your roadmap. You make the decision. The fee is talked through openly in the first conversation and confirmed in writing before any work begins, and the request form is the place to start.