Yesterday's answer survives a 0.57% return. Nothing else.

This article first appeared in The Nest Egg, my daily email, on 2026-09-23. Read the original issue. It is educational, not a recommendation for you. The household in it is a hypothetical example, and market figures are as of the date shown and will have changed.

Every figure below names its document. Every calculation is shown. Nothing here is a forecast.

Good morning. The S&P finished six hundredths of a point lower, which rounds to unchanged, while the Nasdaq 100 added another 0.82% and the VIX fell to 14.21. Then the assumption this whole week has been standing on, removed.

In today's issue

The tape. The S&P ended unchanged, the Nasdaq 100 gained 0.82%, and the VIX fell 4.44% to 14.21. Crude settled at $94.59. Two minutes.

0.57%. That is the annual return the $523.25 margin can absorb before yesterday's answer stops working. Four minutes.

$166,465. What she has to convert at 5% growth instead of $73,400, and what it costs. Three minutes.

One more thing. The thing flat balances were hiding in the other direction. One minute.

The tape

Closing levels and session changes, CNBC US markets, September 22, 2026. Gold and WTI crude are front-month futures settlements, measured against the September 21 settlements.

The story

Yesterday's letter ended on a number that should make anyone uneasy. The conversion paid for itself in 4.44 years, and 72.6% of the annual saving came from moving her Medicare income $523.25 below the $137,000 line.

$523.25 against a $1,126,600 IRA is four hundredths of one percent. And every figure in this letter for two weeks has held balances flat, which is a modeling convenience and not a forecast.

Today we take it out. The IRA grows for the two years between the conversion and her first required distribution, and nothing else changes.

The position

The same household, seventh day in a row.

$1,600,000 in a municipal ladder paying $53,280, held flat, because a ladder's coupons do not grow. $1,200,000 in a traditional IRA. Social Security of $44,000 and $30,000. Both 73, converting now, her first required distribution at 75 on a divisor of 24.6.

One constraint governs everything today, and it is worth stating as a single line. Her Medicare income is adjusted gross income plus tax-exempt interest. Her benefit is fully 85% taxed at $37,400 and the ladder pays $53,280, so:

$137,000 − $37,400 − $53,280 = $46,320

That is the largest required distribution she can take and stay at or under the line. Multiply by the divisor and you get the largest IRA she can carry into that year: $46,320 × 24.6 = $1,139,472.

Everything below is one question. How much does she have to convert today so that the account arrives at $1,139,472?

The arithmetic

Step one. The margin, restated as a return.

Yesterday's $73,400 conversion left $1,126,600 in the IRA. The ceiling is $1,139,472. The room between them is $12,872.

That is 1.14255% of growth over two years, or 0.5697% a year.

So yesterday's 4.44-year payback holds if the IRA earns 0.57% annually, and fails at anything more. It was never a conversion strategy. It was a bet that a $1.1 million retirement account would go sideways for two years.

Step two. What 5% does to it.

$1,126,600 growing at 5% for two years is $1,242,076.50. Her required distribution becomes $50,490.91 and her Medicare income becomes $141,170.91, back over the line by $4,170.91.

The surcharge returns to $2,884.80. The $1,736.40 that was 72.6% of yesterday's saving is gone, and the same $73,400 conversion now saves her $723.71 a year. Payback: 14.67 years.

Step three. Converting enough.

To arrive at $1,139,472 after two years at 5%, the account left behind today has to be $1,139,472 divided by 1.1025, or $1,033,534.69.

The conversion is $166,465.31.

Taxable income goes to $193,865.31, which is deep in the 22% bracket, and the tax goes from $983.80 to $32,074.37. The conversion costs $31,090.57, an effective rate of 18.68%.

Then there is a bill nobody puts in the plan. The couple's own Medicare income in the conversion year is $229,365.31 of adjusted gross income plus $53,280 of municipal interest, or $282,645.31. That is past the $274,000 joint line. Both of them pay $240.40 a month, for one year, two years later: $5,769.60.

Total cost: $36,860.17.

Step four. The saving, and the payback.

Without any conversion, at 5%, the IRA arrives at $1,323,000. Her required distribution is $53,780.49, her Medicare income is $144,460.49, and her bill is $10,778.71 of income tax plus $2,884.80 of surcharge, or $13,663.51.

With the conversion, her required distribution is $46,320, her Medicare income is exactly $137,000, and her bill is $9,137.40 plus $1,148.40, or $10,285.80.

She saves $3,377.71 a year.

$36,860.17 divided by $3,377.71 is 10.91 years.

Each row converts only enough today for the IRA to arrive at $1,139,472 in her first distribution year, which holds her Medicare income at or under $137,000. Cost includes the joint surcharge the conversion itself triggers. 2026 rates per Revenue Procedure 2025-32 and the 2026 CMS income-related monthly adjustment amounts. Growth rates are assumptions used to test sensitivity, not expectations. Hypothetical illustration of published rates, built to show arithmetic. Not a projection of any reader's result and not a recommendation.

What the four of them would say

The portfolio manager. The ladder is the only reason this is even solvable. Its $53,280 is fixed, so the single thing moving her Medicare income is the IRA. Put that $1,600,000 in something that also grows and the line moves underneath her every year, and there is no clean conversion number to find at all.

The CPA. Look at what the conversion did to their own surcharge. Joint Medicare income of $282,645.31 crossed the $274,000 line and cost $5,769.60 for a single year, because surcharges are set from income filed two years earlier. That is 15.65% of the entire cost of the conversion, and it has never once appeared on a conversion plan handed to me.

The financial planner. Read three days of letters together and the honest conclusion is this: the cliff was a bonus, not a strategy. What survives growth is the rate. Converting at 14.46%, or even 18.68%, against a survivor who pays 22% is durable arithmetic. Landing $523.25 under a threshold is not.

The estate attorney. Growth is also the argument the flat model kept suppressing. The $73,400 converted yesterday becomes $80,923.50 in two years at 5%, and not one dollar of that $7,523.50 is ever taxed or ever counted. Left in the IRA, the same growth would have added $305.83 to her required distribution, and to her Medicare income, every year for the rest of her life.

One more thing

Flat balances cut both ways, and it is worth being precise about which way.

They helped the conversion look good, by freezing her permanently $523.25 under a threshold she would cross on any ordinary return.

They hurt it, by deleting the tax-free growth on every converted dollar, which is the entire point of a Roth.

Those two errors do not cancel, and they are not the same size. Removing the first one cost this conversion 6.47 years of payback. Removing the second one gave back $7,523.50 of permanently untaxed growth on a $73,400 conversion, and more on a larger one.

The useful conclusion is not that the conversion got worse. It is that the reason it works changed. Yesterday it worked because of a cliff. Today it works because of a rate, and a rate does not care what the market does.

Tomorrow

Tomorrow we price the one year nobody plans for. The year he dies is normally the last joint return, which makes it the only year this household can convert at joint brackets while already living on a survivor's income.

Sources

2026 brackets, standard deduction and the additional deduction at 65 or older: Revenue Procedure 2025-32. Taxation of Social Security benefits: 26 U.S.C. 86. Roth conversions and qualified distributions: 26 U.S.C. 408A. Uniform Lifetime Table divisors: IRS Publication 590-B, Appendix B. 2026 Part B and Part D income-related monthly adjustment amounts and their two-year lookback: Centers for Medicare & Medicaid Services. The Medicare surcharge income definition: 42 U.S.C. 1395r(i)(4). Market levels, close of September 22, 2026: CNBC US markets.

The conversation a portfolio manager, a CPA, a financial planner and an estate attorney would have about your money if the four of them were ever in the same room. None of them ever talk to each other. This is that room, every weekday at 6:45am, sized to a portfolio between $500,000 and $5,000,000.

The Nest Egg is educational material published by a registered representative. It is not tax, legal or investment advice, and it is not an offer or solicitation. Every case shown is a hypothetical illustration of published rates, built to demonstrate arithmetic, and is not a projection of any reader's result. Growth rates shown are assumptions used to test sensitivity, not expectations. State taxes, itemized deductions and the character of investment income are not modeled here and change the result. Nothing here is a recommendation of any security. Consult your own tax and legal advisors before acting.