The Roth Conversion Decision Guide

A 65-year-old couple with $1.5 million in a traditional IRA feels wealthy. They are. But every dollar in that account is an IOU to the IRS — the balance is roughly 20–30% smaller than it appears once taxes are paid.

Required Minimum Distributions (RMDs) begin at age 73 (75 for those born in 1960 or later). By age 80, that same $1.5 million portfolio, having grown at 6%, is closer to $2.4 million — and the RMD is nearly $110,000 that year, on top of Social Security and any other income. That single fact pushes many otherwise middle-income retirees into the 24% or 32% federal bracket, plus state tax, plus IRMAA surcharges on Medicare.

A Roth conversion strategy pulls forward some of that future tax bill into today's lower brackets — at your control, on your schedule.

The years between retirement and age 73 are almost always the lowest-tax years of a household's life. Wages have stopped. Social Security may be deferred to age 70. RMDs haven't started. Standard deductions still apply.

In these years, a couple with no earned income and modest investment income can often convert $80,000–$150,000 per year while staying entirely inside the 12% or 22% federal bracket. Compare that to the 24–32% bracket the same money would trigger at RMD age, and the arbitrage is obvious.

Miss the window, and you don't get a second chance. RMDs are calculated on the full pre-tax balance and cannot be converted — they must be taken as taxable income.

Your future bracket will be equal to or higher than today's. This is true for most affluent retirees because of RMDs, a surviving spouse filing single (single brackets are compressed), or heirs who are themselves high earners subject to the 10-year distribution rule on inherited IRAs.

You can pay the conversion tax from taxable (non-IRA) money. Paying tax from the IRA itself erodes most of the benefit — you're effectively selling shares at ordinary income rates and pocketing less.

You have a 10+ year horizon before you'd need the converted dollars. Roth growth compounding tax-free is what makes the strategy work; withdrawing three years later mostly just accelerates a tax bill.

You want to reduce the tax burden on inherited assets. Under current law, non-spouse heirs must empty an inherited traditional IRA within 10 years — often during their peak earning years. A Roth inherited under the same rules pays no income tax on withdrawals.

You'll be in a materially lower bracket in retirement and stay there. Not everyone will. Some retirees genuinely do drop two brackets and remain there through RMDs. For them, conversions can be a wash or a loss.

You plan to leave IRA assets to charity. Charitable beneficiaries pay no income tax on distributions from a traditional IRA; converting first just donates after-tax dollars.

The conversion would push you into an IRMAA tier or over an ACA subsidy cliff by more than the tax savings justify. A single dollar over an IRMAA threshold can cost $2,000+ per person, per year, in Medicare surcharges.

You'll be moving to a no-income-tax state within a few years. Converting in California and drawing in Florida is the wrong direction.

Medicare's Income-Related Monthly Adjustment Amount surcharges on Parts B and D are based on your Modified Adjusted Gross Income from two years earlier. The tiers are cliffs, not slopes: one dollar over $218,000 (married filing jointly, 2026) adds roughly $1,000 per person per year in Part B alone. When we model conversions, IRMAA thresholds are hard constraints — we usually convert to the top of a tier and stop, not the top of a bracket.

Sam and Kate, both 65, retired last year. $1.8M in traditional IRAs, $600k in taxable brokerage, $200k cash. Both delaying Social Security to age 70. Federal bracket right now: 12% (their only taxable income is dividends and interest, about $30k/year).

Without conversions, at age 73 their combined RMD starts at roughly $90k. Add $80k of Social Security and they're comfortably into the 22% bracket, brushing IRMAA.

With a five-year conversion plan — roughly $90k/year, filling the 12% bracket and dipping into 22% — they move about $450k into Roth by age 70. RMDs at 73 drop from $90k to about $65k. Lifetime federal tax burden falls by an estimated $180k, and the surviving-spouse tax cliff is significantly reduced.

None of that is generic advice — it's what the math showed for their inputs. Yours will differ.

We project taxable income year by year through age 95, layer in Social Security and RMDs at the correct start ages, and test conversion amounts against the resulting brackets, IRMAA tiers, ACA cliffs (if pre-65), and survivor scenarios. We run at least two market environments — a normal and a poor one — because a bad first-decade return sequence changes optimal conversion size.

The output is a year-by-year schedule with a target conversion amount and a hard ceiling. Each December we recheck the actual year's income and finalize the conversion by December 31.

Conversions are irrevocable. Since 2018 there is no 'recharacterization' — if you convert in January and the market drops 20% by March, you owe the January tax.

Convert late in the year when your income picture is clear. December is normal; October if you want a buffer.

Pay the tax from outside the IRA. Withholding tax from the conversion itself before age 59½ counts as a distribution and triggers a 10% penalty on the withheld amount.

Watch for pro-rata rules if you have after-tax basis in any IRA. It complicates the math and often surprises DIY converters.