Roth Conversions After 60: The Quiet Window Before RMDs Start

You retired at 62, your paycheck stopped, and the plan in your head is simple: leave the traditional IRA alone, let it grow, and start pulling from it when the IRS forces you to. Required minimum distributions do not begin until 73 now, so you figure you have a decade of peace and quiet before the tax bill shows up.

That instinct feels responsible. It is also the most expensive assumption I unwind in this age group.

The problem is not that leaving the account alone is lazy. It is that "do nothing" is itself a decision, and it hands your lowest-tax years back to the government unused. Between the day your wages stop and the day RMDs begin, your taxable income often falls into a valley: no salary, maybe Social Security deferred, no forced withdrawals yet. That valley is the cheapest time you will ever pay tax on the money sitting in your traditional IRA. Doing nothing lets it fill back up later, all at once, at higher rates.

Why is the gap between retirement and RMDs the best time to convert?

Because your marginal rate is usually at its lifetime low, and a Roth conversion lets you volunteer income into that low bracket instead of being forced into a higher one later. Under the SECURE 2.0 Act, RMDs start at age 73 (rising to 75 for those born in 1960 or later), so a person who retires at 62 may have roughly ten years of unusually low taxable income.

Here is the mechanic. A Roth conversion moves money from a traditional IRA to a Roth IRA and you pay ordinary income tax on the converted amount in the year you do it, under §408A(d)(3). There is no age limit and no dollar cap. Once the money is in the Roth, it grows tax-free, comes out tax-free in retirement if the account is at least five years old and you are over 59 1/2 (§408A(d)(2)), and, importantly, a Roth IRA has no lifetime RMDs for the original owner under §408A(c)(5).

So the window does two jobs at once. It lets you pay tax now at a low rate, and it shrinks the traditional balance that will otherwise drive up your RMDs at 73.

Think about what the RMD actually is. It is a percentage of your year-end balance, and that percentage climbs every year. At 73 the divisor from the Uniform Lifetime Table (Reg. §1.401(a)(9)-9) is 26.5, so your first RMD is roughly 3.77 percent of the balance. Left untouched, a large traditional IRA can throw off six figures of forced income a year in your late 70s and 80s, stacked on top of Social Security, whether you need the cash or not.

How much should you convert in a given year?

Convert enough to "fill up" a target bracket, and stop before you spill into the next one or trip a threshold that costs more than the tax itself. The right number is a bracket ceiling minus your other taxable income, not a round figure that feels good.

Run it in this order:

1. Start with your projected taxable income for the year before any conversion: pensions, interest, dividends, part-time work, any Social Security you have already started.
2. Pick a bracket ceiling to fill to. For 2024, the top of the 22 percent bracket for married filing jointly is $201,050 of taxable income (Rev. Proc. 2023-34); the top of the 12 percent bracket is $94,300.
3. Convert the difference. If you are sitting at $60,000 of taxable income and want to fill the 22 percent bracket, that is roughly $141,000 of headroom.
4. Set aside the tax from a taxable account, not from the conversion itself. Paying the tax out of the converted amount shrinks what compounds in the Roth and, if you are under 59 1/2, the withheld portion is treated as a distribution.

The bracket is only half the math. The thresholds around it can quietly cost you more than the bracket jump.

What thresholds can a Roth conversion trip?

Three big ones: IRMAA Medicare surcharges, the taxation of your Social Security, and the 3.8 percent net investment income tax.

IRMAA is the one people never see coming. Your Medicare Part B and Part D premiums are set by your modified adjusted gross income from two years earlier (§1839(i)). A conversion that pushes MAGI one dollar over an IRMAA bracket bumps your premiums for the whole year. For 2024, single filers cross the first IRMAA tier at $103,000 of MAGI and married-filing-jointly at $206,000. Cross it by a dollar and you pay the higher premium on twelve months of Part B and Part D. This is why conversions and Medicare enrollment need to be planned together, and why the biggest, most aggressive conversions often make the most sense in the years before you turn 63, before IRMAA's two-year lookback can reach them.

The Social Security interaction matters too. Up to 85 percent of your benefits become taxable as your combined income rises (§86), so a conversion can pull more of your Social Security into the tax base at the same time. That is one reason the cleanest conversion years are often the ones before you claim benefits at all.

The year the misconception got expensive

A retired civil engineer, single, came to me at 71 with $1.4 million in a traditional IRA and a pension that already covered his living costs. His plan for the prior nine years had been exactly the one at the top of this article: leave it alone until 73. He had spent the entire low-income window, from 62 to 71, in the 12 and 22 percent brackets with enormous unused headroom, and converted nothing.

Now the clock was almost out. His first RMD at 73 was going to land around $53,000, on top of his pension and Social Security, pushing him into the 32 percent bracket and two IRMAA tiers up. The years when he could have moved $100,000 or more annually at 22 percent were gone. We salvaged what we could: two more conversion years at 71 and 72 before RMDs locked in, sized to the top of the 24 percent bracket, plus qualified charitable distributions once RMDs began to bleed off some of the forced income under §408(d)(8). Useful, but a fraction of what nine wasted years could have done.

The lesson was not that he made a dramatic mistake. It is that "wait" quietly compounded against him while nothing seemed to be happening.

Does a Roth conversion always make sense?

No. It is a bet that your tax rate now is lower than your rate (or your heirs' rate) later, and that bet does not always pay.

Skip or shrink the conversion when:

• You will be in a lower bracket later than you are now, which is unusual but real for people with large deductible medical or long-term-care costs ahead.
• You need the IRA money soon and would have to pay the conversion tax from the IRA itself.
• You are relying on low income to qualify for ACA premium tax credits before Medicare kicks in; a conversion raises MAGI and can claw those back under §36B.
• Your heirs are in a low bracket and will inherit under the 10-year rule anyway, making the conversion tax you prepay higher than what they would owe.

One more caution worth stating plainly. Since the 2017 law, a Roth conversion cannot be reversed. The old "recharacterization" of a conversion was repealed by §408A(d)(6)(B)(iii), so once you convert, you owe the tax on that amount for that year. Size it carefully, because there is no undo button.

The window between retirement and RMDs is short, it is quiet, and it does not announce itself. If you are in it, or about to be, that is the conversation to have this year, not at 72. Because the math depends heavily on your other income, your state, and your Medicare timeline, run your specific numbers before you convert, and loop in your advisor on the IRMAA and Social Security timing.

Sources

• IRC §408A(d)(3) (Roth conversions taxed as ordinary income)
• IRC §408A(d)(2) (qualified distribution requirements)
• IRC §408A(c)(5) (no lifetime RMDs for Roth IRA owner)
• IRC §408A(d)(6)(B)(iii) (repeal of conversion recharacterization)
• IRC §86 (taxation of Social Security benefits)
• IRC §36B (premium tax credit)
• IRC §408(d)(8) (qualified charitable distributions)
• IRC §1839(i) (Medicare Part B income-related monthly adjustment amount, IRMAA)
• SECURE 2.0 Act of 2022 (RMD beginning age 73/75)
• Reg. §1.401(a)(9)-9 (Uniform Lifetime Table)
• Rev. Proc. 2023-34 (2024 inflation-adjusted bracket thresholds)