Meta Staff Engineer Sabbatical: $180k Roth Conversion in a Low-Income Year
A Meta staff engineer takes a 12-month sabbatical and uses the income dip to convert $180k of traditional IRA to Roth at the 22% bracket.
A staff engineer at Meta, based in Portland, took a 12-month unpaid personal leave from January 2025 to January 2026. His manager approved the leave, his role was held open, and he expected to return. During the leave, his income dropped to near zero: no wages, no bonus, no new RSU vests (his next vest was scheduled for February 2026). He had $455,000 in a rollover IRA from a previous employer (Netflix), all pre-tax. He asked us to find tax moves that only worked in a low-income year.
Situation
His income profile for 2025:
- Meta wages: $0 (unpaid leave).
- RSU vests: $0 (no vest during leave).
- Investment income: $14,000 of qualified dividends on taxable brokerage.
- Interest: $6,200 on savings.
- His spouse was a freelance designer earning ~$48,000/year.
- Total household income before any tax moves: ~$68,200.
Standard deduction MFJ 2025: $30,000. Taxable income at $68,200 baseline: $38,200. Federal bracket: 12% up to $96,950 MFJ.
The key insight: he had $58,750 of “room” in the 12% bracket ($96,950 - $38,200) before hitting 22%. And another $110,050 before hitting the 24% bracket at $207,000. Every dollar of Roth conversion in these brackets was taxed at 12-24% vs. his normal marginal rate of 32-37%.
His traditional IRA balance: $455,000 (pre-tax, fully deductible contributions over 12 years at Netflix).
Conversion math (bracket-by-bracket):
| Conversion amount | Marginal bracket applied | Federal tax cost | Net savings vs. 35% future rate |
|---|---|---|---|
| $50,000 | Mostly 12% | ~$6,500 | $11,000 |
| $100,000 | 12% + some 22% | ~$18,200 | $16,800 |
| $150,000 | 12% + 22% | ~$29,200 | $23,300 |
| $180,000 | 12% + 22% | ~$35,800 | $27,200 |
| $230,000 | Crosses into 24% | ~$48,400 | $32,100 |
His “sweet spot” was converting through the 22% bracket and stopping before hitting 24%. That was approximately $180,000 of conversion.
He also needed to consider Oregon state tax. Oregon has a 9.9% top bracket kicking in around $125k taxable income. Converting $180k would push him into Oregon’s top bracket for the marginal $100k of conversion, costing $9,900 of Oregon tax. Oregon’s structure made the sweet spot slightly less generous than federal alone.
Also: Roth conversions do not require him to be in a qualifying income bracket. Anyone can convert traditional IRA to Roth at any time, paying ordinary income tax on the conversion. The question is just whether the tax rate on the conversion is lower than the rate on future withdrawals.
What we modeled
Three scenarios:
| Strategy | 2025 federal tax | Future Roth growth (20yr @ 7%) | Net present benefit |
|---|---|---|---|
| Do nothing | ~$0 | Traditional IRA: $455k grows to $1.76M, taxed at future 32%+ | Baseline |
| Convert $180k at 12-22% | ~$36k federal + $9.9k OR | $180k grows to $697k tax-free in Roth; remaining $275k traditional grows to $1.06M | +$85k tax-adjusted |
| Convert $300k, crossing into 24% | ~$63k federal + $20k OR | $300k grows to $1.16M tax-free; remaining $155k traditional grows to $600k | +$98k tax-adjusted, but less efficient marginal |
Sweet spot was $180k. The 24% bracket was worse but not catastrophic; the 32% bracket was approximately break-even with his future rate. 35% was clearly bad.
Other considerations:
- Healthcare subsidies: if he had been on an ACA marketplace plan, the conversion income would have triggered subsidy clawbacks. He was on his spouse’s COBRA from her prior employer (funded by his severance from Netflix years ago), so this did not apply.
- Medicare IRMAA: not applicable until 65. Roth conversions in the years leading up to Medicare eligibility can cause IRMAA surcharges 2 years later. He was 38, not a concern.
- Pro-rata rule: he had no non-deductible contributions in the traditional IRA, so pro-rata was simple. All converted dollars were fully taxable.
- State residency: Oregon resident throughout. Conversion tax would land in Oregon regardless.
- Cash flow: conversion itself does not require cash. Only the tax on the conversion requires cash. He paid the conversion tax from his $85k taxable brokerage account rather than from the Roth conversion proceeds (which would have defeated the purpose).
What he did
He converted $180,000 from his traditional IRA to Roth in December 2025 (waited until December to finalize 2025 income and avoid surprises). He paid approximately $45,700 of federal + Oregon tax on the conversion (blended 22% federal + 9.9% Oregon on the marginal $100k, 12% on the first $60k). Net Roth balance after conversion: approximately $180,000 of new Roth principal.
Separately, he used the sabbatical year to maximize other low-income tax moves:
- Harvested $12,000 of long-term capital gains from his taxable brokerage at the 0% LTCG rate (applies below $96,700 MFJ taxable income for 2025). This stepped up basis on appreciated positions without paying any tax, effectively a free tax-loss-harvest-in-reverse.
- Made a full backdoor Roth contribution for both him and his spouse: $7,000 each, $14,000 total.
- Contributed $8,550 to an HSA (he maintained an HSA-eligible plan through his spouse’s freelance benefits).
Total tax-advantaged savings 2025: $180,000 conversion + $14,000 backdoor Roth + $8,550 HSA = $202,550.
What he wishes he had done differently
He did not convert in spring 2025 when the market was down 9%. The conversion executes at the fair market value on the conversion date. Converting when his traditional IRA was down to $415,000 (from $455k pre-drawdown) would have meant the same $180k conversion produced a larger percentage of his pre-tax balance converted, or alternatively, the same percentage at a lower tax cost. Timing conversions against market dips is a small but real edge.
He also did not coordinate the conversion with year-end harvest timing. He realized $12,000 of LTCG in December on the same day as the Roth conversion. Had he realized the LTCG in a different tax year (say, early 2026 before Meta income resumed), he could have preserved more of the 12% federal bracket for the conversion.
Third: he almost didn’t take the sabbatical. Meta’s unpaid leave policy was generous, but the opportunity cost felt high. In hindsight, the year produced tax moves worth $80-100k of present-value benefit, on top of the rest-and-reset value of the leave itself. The financial logic favored taking the leave in addition to any personal logic.
Fourth: he did not use the sabbatical year to do a Roth conversion ladder strategy or other multi-year plan. If he had anticipated another low-income year (say, if he had intended to leave Meta entirely), he could have done multiple $180k conversions across 3-4 years. As it stood, he converted once and moved on. Partial conversion in 2025 followed by more in 2026 (before Meta income fully resumed) might have been possible if he delayed his return to March or April.
Frequently asked
What is a Roth conversion?
Transferring pre-tax IRA or 401(k) dollars into a Roth account by paying ordinary income tax on the amount transferred. After conversion, the Roth balance grows tax-free and withdrawals in retirement are tax-free (subject to age and 5-year rules).
When does a Roth conversion make sense?
When your current-year marginal tax rate is lower than your expected rate on eventual withdrawal. Low-income years (sabbaticals, job transitions, early retirement, gap years) are ideal. The break-even rate depends on your time horizon and expected return.
Is there a limit on Roth conversions?
No. Roth conversions have no income limit, no annual dollar cap, and no age limit. They are a reporting event, not a contribution event.
Does a Roth conversion affect my AGI?
Yes. The converted amount is included in AGI for the year of conversion, which can affect Medicare IRMAA, ACA subsidies, Social Security taxation, and other AGI-dependent calculations.
What is the 5-year rule on Roth conversions?
Each Roth conversion starts its own 5-year clock. Withdrawal of the converted principal before 5 years and before age 59 1/2 triggers a 10% penalty (but no income tax, since the conversion already was taxed). After 5 years, principal is penalty-free.
Composite scenario drawn from common patterns in our advisor network's casework. Names, companies, and exact numbers are illustrative. Not tax, legal, or investment advice.