Roth conversions—transferring money from traditional IRAs to Roth IRAs—are one of the most powerful tax planning tools for retirees. By paying taxes now at lower rates, you create tax-free income for the future and reduce Required Minimum Distributions (RMDs). But timing is everything: convert too early and you pay unnecessary taxes; convert too late and RMDs force large withdrawals at high rates. This guide explains when to convert, how much to convert, and strategies to maximize tax savings over your retirement.
Key Takeaway
The sweet spot for Roth conversions is the "gap years" between retirement and age 73 (when RMDs start). During this window, you can convert traditional IRA funds at 10-12% tax rates, potentially saving 10-20%+ in taxes compared to waiting for RMDs to force higher bracket withdrawals.
How Roth Conversions Work
A Roth conversion moves money from a traditional IRA (or 401k rolled to IRA) into a Roth IRA:
- Tax consequence: You pay ordinary income tax on the converted amount in the year of conversion (just like a withdrawal, but no 10% early withdrawal penalty)
- Future benefit: Converted funds grow tax-free forever; Roth withdrawals are tax-free in retirement
- No RMDs: Roth IRAs are not subject to Required Minimum Distributions, so funds can continue growing tax-free as long as you live
- Estate benefit: Heirs inherit Roth IRAs tax-free (though they must withdraw within 10 years under current rules)
Example: $50,000 Roth Conversion
- Traditional IRA balance: $500,000
- Convert: $50,000
- Tax owed: $6,000 (if in 12% bracket) or $11,000 (if in 22% bracket)
- Result: $50,000 now in Roth IRA, growing tax-free; traditional IRA reduced to $450,000
Key Takeaway
Roth conversions are a "pay taxes now to avoid taxes later" strategy. They only make sense if you'll be in the same or higher tax bracket when you'd otherwise withdraw the money (during RMDs or later in retirement).
When to Do Roth Conversions: The Best Windows
Prime Window 1: Early Retirement (Age 60-72)
Why it's ideal:
- Low income years: You've stopped working but haven't started Social Security or RMDs yet—income may be minimal
- Fill low tax brackets: Convert just enough to stay in 10% or 12% bracket
- Avoid future RMDs: Every dollar converted reduces traditional IRA balance, lowering future required withdrawals
- Time for growth: Converted funds have 10-20+ years to grow tax-free before you need them
Example scenario:
- Age 62: Retired, no earned income, not yet claiming Social Security
- Current income: $20,000/year from taxable account withdrawals (mostly return of principal, low taxable amount)
- 12% bracket top: $96,950 (married filing jointly, 2025)
- Conversion opportunity: Convert ~$75,000 to fill up the 12% bracket
- Tax cost: ~$9,000 (12% on $75k)
- Benefit: Avoid paying 22-24% later when RMDs push you into higher brackets
Prime Window 2: Market Downturns
Why it's ideal:
- Depressed asset values: If your IRA drops 20-30% in a bear market, convert when values are low
- Pay tax on less: Convert $100k worth of shares that were $150k last year—save taxes on $50k
- Tax-free recovery: When markets rebound, all recovery happens in the Roth (tax-free)
Example:
- 2024: IRA balance $600k
- 2025 market crash: IRA drops to $450k
- Convert: $100k (pays tax on $100k instead of waiting until it recovers to $130k+)
- 2027: Markets recover; that $100k is now worth $130k—all tax-free in Roth
Avoid Window 1: High-Income Working Years
Why it's bad:
- Already in high brackets: Paying 22-32% on conversions when you might withdraw at 12-22% in retirement
- Opportunity cost: Tax dollars paid on conversions could have been invested and growing
Exception: If you're a high earner who expects to remain in high brackets even in retirement (due to large IRA balances, pensions, rental income), converting now avoids even higher rates later.
Avoid Window 2: Ages 63-64 (Before Medicare)
Why it's risky:
- IRMAA look-back: Medicare Income-Related Monthly Adjustment Amount (IRMAA) looks back 2 years
- Consequence: Large Roth conversion at age 63 increases income, triggering IRMAA surcharges at age 65
- Cost: IRMAA can add $2,000-$6,000+/year to Medicare premiums
Strategy: Complete most conversions by age 62, or wait until after 65 (when conversions won't affect current Medicare premiums).
Key Takeaway
The ideal Roth conversion window is age 60-62 (before Medicare IRMAA matters) and again age 66-72 (after IRMAA risk passes but before RMDs start). Avoid large conversions at 63-64 unless you're willing to pay higher Medicare premiums.
How Much to Convert: Filling Tax Brackets
The optimal conversion amount is typically "as much as fits in your target tax bracket"—don't spill into the next bracket unless you expect to be there anyway during RMDs.
2025 Federal Tax Brackets (Married Filing Jointly)
| Tax Rate | Income Range | Strategy |
|---|---|---|
| 10% | $0 - $23,850 | Always fill if possible |
| 12% | $23,850 - $96,950 | Excellent conversion rate—usually worth filling |
| 22% | $96,950 - $206,700 | Consider if you expect 22%+ bracket during RMDs |
| 24% | $206,700 - $394,600 | Only if you'll definitely be in 24%+ later |
| 32%+ | $394,600+ | Rarely worth converting at these rates |
Calculating Your Conversion Amount
Formula: (Top of target bracket) - (Your current taxable income) = Max conversion amount
Example (Married, 2025):
- Target bracket: 12% (top at $96,950)
- Current income: $35,000 (part-time work + investment income)
- Max conversion: $96,950 - $35,000 = $61,950
- Tax cost: ~$7,434 (12% on $61,950)
Advanced: Account for standard deduction if not already used:
- Standard deduction: $30,000 (married, 2025)
- If you have no other income: You can convert $30,000 + $23,850 (10% bracket) + $73,100 (12% bracket) = $126,950 and stay in 12% bracket
Multi-Year Roth Conversion Strategy
Rather than one large conversion, spread conversions over multiple years to stay in low brackets:
Example: $500k Traditional IRA at Age 62
Goal: Convert most of it before RMDs start at 73, staying in 12% bracket
- Ages 62-69 (8 years): Convert $50k-$60k/year
- Total converted: $400k-$480k
- Tax paid: 12% on each conversion = $48k-$58k total over 8 years
- Remaining traditional IRA: $20k-$100k (much lower RMDs at age 73+)
Without conversions (for comparison):
- Age 73 RMD: $500k / 26.5 (IRS table) = $18,868 (first year)
- RMDs grow larger: As divisor shrinks, RMDs increase each year
- Likely pushed into 22% bracket: Combined with Social Security and other income
- Lifetime tax: Potentially 22-24% on most withdrawals = $110k-$120k in taxes
Tax savings with conversion strategy: $110k - $58k = $52,000+ saved
Key Takeaway
Think of Roth conversions as a multi-year project, not a one-time event. Spreading conversions over 5-10 years lets you stay in low brackets and avoid triggering tax cliffs like Social Security taxation and IRMAA surcharges.
Roth Conversions and Social Security Taxation
Roth conversions increase your income in the conversion year, which can trigger Social Security taxation:
Social Security Taxation Thresholds
- Combined income = AGI + tax-exempt interest + 50% of Social Security
- Married filing jointly:
- Under $32k: 0% of SS taxable
- $32k-$44k: Up to 50% of SS taxable
- Over $44k: Up to 85% of SS taxable
The "Tax Torpedo" Effect
In the $32k-$44k zone (married), each extra dollar of income causes $0.50 of Social Security to become taxable—creating effective marginal rates of 18-22.5% even in the 12% bracket:
- $1,000 Roth conversion in 12% bracket = $120 tax
- PLUS $500 more Social Security becomes taxable (50% of $1,000) = $60 additional tax
- Total: $180 tax on $1,000 conversion = 18% effective rate
Strategy: Convert Before Claiming Social Security
- Ages 62-69: Delay Social Security, live on savings/Roth withdrawals, do large Roth conversions
- Age 70: Claim Social Security (now maximized with delayed credits)
- Result: Conversions done at clean 10-12% rates without SS taxation complications
Roth Conversions and IRMAA (Medicare Surcharges)
Large Roth conversions can trigger Income-Related Monthly Adjustment Amounts on Medicare premiums:
2025 IRMAA Thresholds (Based on 2023 Income)
| Income (Married) | Additional Part B Premium | Additional Part D Premium |
|---|---|---|
| Under $212,000 | $0 | $0 |
| $212,000 - $266,000 | +$244/month | +$13/month |
| $266,000 - $334,000 | +$489/month | +$34/month |
| $334,000 - $400,000 | +$733/month | +$55/month |
Strategies to Avoid IRMAA
- Convert before age 63: IRMAA looks back 2 years, so high income at 63 affects premiums at 65
- Stay just under thresholds: An extra $1,000 over $212k can cost $3,000+ in annual IRMAA charges
- Spread conversions: Do $100k/year for 3 years instead of $300k in one year to stay under IRMAA cliffs
- Resume after 65: Once on Medicare, IRMAA only looks at current income—you can manage it year-by-year
Where to Get Money to Pay Conversion Taxes
Paying conversion taxes from the IRA itself reduces the benefit—ideally, pay from other sources:
Best: Pay from Taxable Accounts
- Why: Keeps the full conversion amount growing tax-free in the Roth
- Example: Convert $50k, pay $6k tax from savings → Full $50k compounds in Roth
Okay: Withhold from the Conversion
- Why: Simple, but reduces Roth balance
- Example: Convert $50k, withhold $6k for taxes → Only $44k goes to Roth
- If under 59½: Withheld amount may be subject to 10% early withdrawal penalty
Last Resort: Pay from Roth (If Over 59½)
- Why: Defeats the purpose, but viable in emergencies
- Must be 59½+: Otherwise, withdrawing from Roth triggers penalties on earnings
Key Takeaway
Always try to pay Roth conversion taxes from taxable accounts (savings, brokerage) rather than withholding from the IRA. This maximizes the amount growing tax-free in your Roth and avoids early withdrawal penalties if you're under 59½.
Roth Conversion Pitfalls to Avoid
- Converting too much in one year: Pushes you into higher brackets unnecessarily—spread over multiple years
- Not having cash to pay taxes: Withholding from the IRA reduces the benefit and may trigger penalties
- Ignoring IRMAA cliffs: Converting $1k more than the $212k threshold costs $3k+ in Medicare premiums
- Converting right before you need the money: Roth contributions can be withdrawn anytime, but earnings must season 5 years to be penalty-free (and you must be 59½+)
- Converting in high-income years: Wait for low-income years (early retirement) to do conversions
- Not considering state taxes: Some states tax Roth conversions heavily—consider moving to no-tax state first
Advanced Strategy: Roth Conversions for Heirs
Even if you don't need the money, Roth conversions can maximize the inheritance you leave behind:
- Heirs inherit Roth IRAs tax-free: They must withdraw within 10 years, but all withdrawals are tax-free
- Heirs inherit traditional IRAs taxable: They pay taxes at their (possibly high) ordinary income rates
- You pay taxes at your (lower) rate: If you're in 12% bracket and heirs are in 24% bracket, converting saves 12%
Example:
- Traditional IRA: $500k left to heirs → They pay $120k in taxes (24% rate) → Net $380k
- Convert to Roth: You pay $60k in taxes (12% rate) → Heirs get $440k tax-free → $60k more to heirs
How Bullseye Helps Plan Roth Conversions
Bullseye allows you to model different Roth conversion strategies:
- Test conversion scenarios: Use the Scenarios feature to compare:
- No conversions (baseline)
- Convert $50k/year from age 62-69
- Convert $100k/year from age 60-64
- See tax impact year-by-year: Bullseye projects federal and state taxes, showing how conversions affect your tax bill
- Model RMD reductions: Lower traditional IRA balances from conversions = lower RMDs at age 73+
- Integrate with Social Security timing: Test delaying SS while doing conversions to minimize tax torpedo effect
- Check IRMAA triggers: Bullseye calculates Medicare IRMAA surcharges based on income, helping you avoid costly cliff edges
Limitation: Bullseye doesn't automatically recommend optimal conversion amounts—you'll need to test different scenarios manually to find the strategy that maximizes after-tax retirement wealth.
Summary: Your Roth Conversion Strategy
Key Takeaway
Roth conversions are most valuable when done gradually during low-income years (ages 60-72) before RMDs start. Convert just enough to fill the 10-12% tax brackets, avoid IRMAA cliffs, and pay taxes from taxable accounts to maximize long-term wealth.
Your Roth conversion checklist:
- Identify your conversion window: Best during ages 60-62 and 66-72 (avoid 63-64 due to IRMAA)
- Calculate bracket capacity: How much can you convert while staying in 12% (or 22% if justified)?
- Spread over multiple years: Convert $50k-$100k/year for 5-10 years rather than one large conversion
- Coordinate with Social Security: Delay SS to age 70 while doing conversions to avoid tax torpedo
- Pay taxes from taxable accounts: Maximize Roth balance and avoid penalties
- Watch IRMAA thresholds: Stay under $212k (married) or $106k (single) to avoid Medicare surcharges
- Model multiple scenarios: Use retirement planning tools to compare conversion strategies
- Reassess annually: Tax laws, income, and personal circumstances change—adjust your strategy yearly