Between the year you stop earning a paycheck and the year required minimum distributions (RMDs) begin at age 73, there is often a narrow window of unusually low taxable income. The mortgage may be paid down, the children are out of the house, and Social Security may not have started yet. Tax brackets that used to feel out of reach are suddenly available.
That window is where Roth conversions earn their keep.
What a Roth conversion does
A Roth conversion moves pre-tax dollars from a Traditional IRA or 401(k) into a Roth IRA. The converted amount is taxable income in the year of conversion, but once inside the Roth, the money grows tax-free and is never subject to RMDs during the original owner's lifetime.
Done well, conversions reduce the size of your future RMDs, lower your lifetime tax bill, and leave heirs with tax-free assets. Done poorly, they hand the IRS money you'd have paid less for later.
Why the years 60–72 are special
- No earned income. Wages have stopped. Your only income may be modest portfolio dividends, capital gains, or a partial pension — none of which pushes you into a high bracket.
- Social Security can be delayed. Many clients delay benefits until 70. Until then, the "taxation of Social Security" formula isn't running.
- RMDs haven't started. Once RMDs begin at 73, they may force you into a higher bracket whether you need the money or not. Converting before then is a chance to fill the lower brackets on your terms.
- Medicare IRMAA hasn't bitten yet. The IRMAA surcharge on Medicare premiums uses two-year-lagged income, so conversion years before age 63 don't affect Medicare premiums.
How much to convert
The right answer almost always comes from a multi-year tax projection — not a rule of thumb. The model needs to balance:
- Your current marginal bracket versus the bracket your RMDs will likely land in.
- The taxable income required to keep a long-term capital gain at the 0% rate (if applicable).
- Income thresholds that trigger the Net Investment Income Tax (3.8%) or IRMAA surcharges (after age 63).
- State income tax — Illinois exempts retirement income, but a future move could change the math.
- Charitable giving plans, since Qualified Charitable Distributions can substitute for conversions after age 70½.
Pay the tax with outside money, not the converted balance. Withholding from the conversion itself shrinks the Roth and, before age 59½, can trigger a 10% early-withdrawal penalty on the withholding portion.
A practical sequencing
For many households the playbook looks like:
- Years 1–2 of retirement. Live off taxable accounts. Convert enough to fill the 22% or 24% bracket — whichever is the right ceiling given your projected RMDs.
- Years 3–5. Continue annual conversions, adjusting each year for portfolio performance and tax-law changes.
- Year before Social Security and Medicare changes. Pause and reassess. Once RMDs and Social Security stack, the marginal cost of a conversion typically rises sharply.
There's no universal right answer. The conversion that's brilliant for one household is wrong for the household down the street with a different state tax picture, different charitable plans, and different RMD trajectory. Run the model first.
