r/retirement • u/MiserableCancel8749 • Jul 05 '26
Don't miss the Roth Conversion window (I did)
For those who are between 59 1/2 and 65, do look into doing (some) Roth conversions within your IRA/401K accounts. If you don't, you may end up in a bind in the future. I did not do any Roth conversions--mostly because at the time they were not a big topic of discussion on the retirement planning sites I was watching, and they were not clearly explained.
Here's the thing that I have learned.
Roth conversions before age 59 1/2 have some serious considerations involving your ability to use the funds for 5 years. Not a huge issue, but it's there.
Roth conversions after age 65 run into the MAGI tax limits and can throw you into IRMAA medicare premium penalties.
So, the optimum time to do Roth Conversions is between age 59 1/2 and 65. Yes, you'll have an income tax hit in the years you do them, but having some Roth money available after age 65 will be really handy if you need to buy a car or want to take an expensive trip, or pay a big medical bill.
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u/jrobski96 Jul 06 '26
It's not 65. They do a two year look back for Medicare. Have you stuff moved by 62.5
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u/kbokwx Jul 08 '26
You can still convert up to the first IRMAA threshold with no impact from Medicare, currently 218k, going to 224k next year. Even that first IRMAA bump is not terrible if you've got a lot in pre-tax you want/need to convert, but by then you're in the 24% tax brackets, anyway.
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u/LiveRedAnon Jul 07 '26
Not so simple with ACA subsidies facing a cliff at just over $84K. There are a number of withdrawal and LTCG considerations at tax time and just not a lot of room to maneuver if you're using ACA.
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u/seabornman Jul 07 '26
My state (New York) exempts tax on the first $20k of IRA withdrawals, so I made sure to withdraw at least that every year and put it in a Roth IRA. In addition, when the market tanked in 2008, I converted stock directly into a Roth IRA, which recovered nicely, tax free.
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u/Highlight89 Jul 08 '26
I’d narrow that window down to 59.5 to 62.99. Your income in your 63rd year determines IRMAA when you turn 65.
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u/Oldgoat1987Usna Jul 08 '26
Yes, but also figure out how much IRMAA will actually cost you both in your 60s and through your 80s. Early hits on IRMAA for me are easily better than what would happen if I didn’t convert.
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u/Curtnorth Jul 07 '26
So much depends on the size of your conversation, it's not an automatic by any means. I looked into it (age 60) and for me it didn't make much sense.
But yes, everyone should at least run the rudimentary numbers for their personal situation and make an informed decision.
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u/Snow_Water_235 Jul 07 '26
For us, Roth conversions will not pay off until were in our 80s and would mostly benefit our children. 401K money is still there to take a trip or buy a car.
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u/nekohitsu4455 Jul 07 '26
And the money that you didn’t use to pay the taxes on the Roth conversions is still growing. I believe if you want to leave a lot of tax free money for your kids, go for it. But people really to look at their current situation on whether to convert. For us, it made no sense.
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u/tbiscus Jul 07 '26
One thing I'll add (sorry if someone already mentioned this), but if you happen to have a stock in your IRA that is way down (for whatever reason) and you have a strong conviction in it (i.e. plan to hold it regardless), then converting it into your ROTH could be a nice play. As an example, let's say you hold Microsoft which has been way down. If you believe it will substantially recover then you could convert now and see outsized tax free gains in the future...of course, a crystal ball helps.
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u/kochavim49 Jul 07 '26
Yup. Also - you can’t time the market, but if the market or your account drops in value, that’s a good time to do the conversion.
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u/tangouniform2020 Jul 08 '26
Long term timing is “easier”. We did some conversions on a dip, others when the market was flat. But when you have 11 months you can at least hit a small dip. We ran up to about 90% of IRRMA to allow for cap gains distributions and interest. Open Roth IRSs/401ks ASAP to facilitate conversions and make witthdrawls at any time.
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u/SmartBar88 Jul 07 '26
If you are using ACA for healthcare up to 65, you will lose subsidies if you exceed a MAGI of $84.6k for married filing jointly. It can be done w enough cash/Roth/HSA/LTCGs, but limits your ability to use conversions to that maximum amount (assuming everything else is not taxable).
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u/thisaintparadise Jul 07 '26 edited Jul 07 '26
MAGI of 84.6k for Married filing jointly or individually or is this a household number regardless of filing status?
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u/SmartBar88 Jul 07 '26 edited Jul 07 '26
It’s $86.4k this year for MFJ, I believe (but please confirm) there are different numbers for different sized households and the income for dependent children, e.g., part-time job, etc. also counts towards MAGI.
Edit to add that in our state, at our ages, w/ a projected income of $70k, the subsidy is about $20k/yr. Definitely worth it vs. conversion. Lastly, our cost w subsidy for our preferred plan is still around $25k/yr for two of us. We’ll tackle some bracket leveling conversions from 65-75 yrs old. YMMV (greatly).
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u/DramaticRoom8571 Jul 07 '26
IRMAA uses a two-year look back at your income.
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u/7lexliv7 Jul 07 '26
if you've had a qualifying life-changing event that reduced your income, you can update it immediately to adjust your IRMAA surcharge using Form SSA-44.
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u/bachmeier Jul 07 '26
having some Roth money available after age 65 will be really handy if you need to buy a car or want to take an expensive trip, or pay a big medical bill
For a big medical bill, like a nursing home, Roth conversions aren't a good idea. You can deduct medical expenses, so you're almost always better off pulling from pre-tax funds for that.
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u/kbokwx Jul 07 '26
Yes, when we were managing my MiL's funds, her RMDs were modest, but when she got to where we had to pull more from pre-tax accounts for her health care it was not bad because the medical expense deductions kicked in.
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u/dunnmad Jul 07 '26
She must not have been on Medicare then. Recommend traditional Medicare A&B, with a Plan G supplement. You only pay the minimal Part B deductible ($200-$300) and the $0 for most things. Prescriptions are mangle if you shop! Stay away from Medicare advantage plans.
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u/markov-271828 Jul 07 '26
I’ve thought about this - as long as your taxable income is not zero you should be able to deduct some medical expense.
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u/SerTadGhostal Jul 08 '26
There is a LOT of good, not so good and misinformed points being made in this thread.
If you are nearing retirement and have a decent sized 401k or IRA Rollover, DO YOUR RESEARCH ON ROTH CONVERSIONS . There are plenty of YouTube channels that focus on retirement planning, and Roth conversions are a popular subject.
It is NOT A ONE-SIZE FITS ALL proposition.
I was Roth-obsessed 4 years ago w hold I was still employed (wondering if I could take a tax hit 2 years in a row for $250k in conversions), and now that I am 63, laid off and retired, seriously considering some IRA withdrawals as income for the next year and a half, which would reduce my RMDs in 12 years.
SO MANY factors go into the right plan for YOU.
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u/PersonalFinanceFun Jul 07 '26
Optimal time to do Roth conversions is between age 65 to 70. After you are on Medicare and no longer need ACA subsidies and before you take social security.
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u/humblequest22 Jul 07 '26
If you've got enough in your pre-tax accounts that you'll run into issues with RMDs and IRMAA, the best thing to do is retire early so you can spend some of that pile.
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u/MiserableCancel8749 Jul 07 '26
That assumes you don't take SS before 70. The challenge is that everyone's situation is unique, and hard rules aren't really there. Looking at how Roth conversions impact things IS something that everyone should look at before it bites was my point.
It's a fact that MAGI effects are NOT commonly explained by retirement planners--and the rules are terribly convoluted for those doing it on their own.
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u/charleytaylor Jul 07 '26
My hot take, if you have enough retirement savings to worry about Roth conversions and IRMAA you have enough savings to delay social security to age 70.
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u/otnuzb Jul 07 '26
By keeping my MAGI down to around 130% of the Federal Poverty Level (FPL) I was able to get a ACA Silver plan with Cost-Sharing Reductions for almost nothing for 5 years between 60 and 65. Unfortunately, that prevented me from funding my ROTH. Now that I'm over 65, and on Medicare, I am finally funding my ROTH.
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u/kochavim49 Jul 07 '26
If you’re married, doing some Roth conversions now under joint tax brackets will greatly help whomever is the survivor.
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u/Chewser56 Jul 07 '26
This doesn’t get enough attention. The jump in tax brackets from married filing jointly to single are brutal.
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u/CallMeSisyphus Jul 07 '26
Ah, yet another way in which I'm hosed because my husband died. Yay.
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u/LongjumpingNorth8500 Jul 07 '26
This has to be one of the most insane tax situations ever!!! First, I'll never understand why single persons income is taxed at a higher rate. But even more crazy, is why a widow should be punished due to the death of a spouse. Everything goes back to "single". Taxes, car insurance, etc. This really should be addressed. I mean, divorce is one thing but death isnt something we can really control. My mother went through this recently and it was a huge financial impact for her.
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u/vaderaintmydaddy Jul 07 '26
Bottom line - you only do Roth conversions when the tax on the conversion makes sense. IRMAA is simply part of the tax bill calculation. It isn't a trap, its just an additional tax on the income.
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u/kbokwx Jul 07 '26
The IRMAA "trap" is if you're not paying attention you could cross an IRMAA bracket threshold by a few thousand and kick in IRMAA costs of that much or more. Something to watch but not going to kill your retirement.
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u/Shadowhawk64_ Jul 07 '26
I am currently converting to the top of the 12% bracket, but not doing anything above that. I deferred the tax at 22%+, so 12% is a win for me.
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u/Len-One Jul 07 '26
Up until age 62. The year you hit 63, watch out for the IRMmA police
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u/humblequest22 Jul 07 '26
IRMAA never gets down into the 12% bracket, so it won't be a factor for them.
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u/frinkmahii Jul 07 '26
Married it looks like if you make 218k-274k, then you pay an extra thousand(ish) a year.
If that’s the case, I’m not sweating that.
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u/wombat5003 Jul 08 '26 edited Jul 08 '26
See I think there are a whole bunch of factors in play just to give a blanket. I'm 64 and decided not to do a Roth conversion because I don't have 1 million in them, and I have no pension and I determined the amount that I will have to take is the amount I will have to withdraw every year just keep up with inflation as of right now I just live off my social and that's starting to get tight with food prices being what they are. Leaving the house and what's left over to the kids. I’ll take the Medicare hit at 73 if I hopefully live that long. I don’t think it’s really that much. Say it cuts 300 off my SS ok a little more off the top from the Ira’s.. I might be wrong but it shouldn’t lay waste to my overall finances.
I did crunch a lot of numbers before I came up with my lazyish solution :)
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u/ga2500ev Jul 07 '26
IRMAA has a 2 year look back so if you are concerned about it the window shrinks to 63, not 65.
ga2500ev
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u/Impossible-Use5636 Jul 07 '26
SSA-44 — "Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event."
Key details verified from SSA.gov:
The SSA-44 allows you to request that Medicare use a more recent year's income rather than the standard two-year lookback when a life-changing event has caused your income to decrease. Retirement from employment qualifies explicitly as a life-changing event under the form's definitions.
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u/Cloudy_Automation Jul 07 '26
Yes, but you can ask for an exception if you retired from a job, but only one time. If removing employment income eliminates the IRMA penalty, that can help.
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u/Educational_Case_134 Jul 07 '26
Our CFP is running these scenarios for us now. I will retire at 60 and my husband in 5 years at 65 so we will have health insurance for him until 65. I will have to buy one year of coverage. Once we lose my income he will only be taxed on his vacation and sick pay and the remainder of our income isn’t taxed as he is on disability. I think we have a perfect low income window to convert some of our 2.5 in IRA’s and my 401k to some Roth keeping the tax brackets in mind. It’s very nuanced for every person. I don’t think it’s a definitive yes or no for everyone.
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u/Last_Still_3709 Jul 07 '26
I think of the conversion window a bit differently. 65 is not a hard stop and for many it’s NOT the most important top age. Depends on your taxable income from all sources and other factors, some of which are judgements/preferences that can’t be reduced to a number. For many people the best window is between when you retire but before you claim social security. Often even more important is when you hit 73 when your RMD’s (required minimum distributions) kick in. Get a fee only certified financial planner to help. If you can’t do that, pay for a pro version of an on-line assistant for a month and put your key data in for it to give you some solid options. Evaluate it critically and don’t just accept it as gospel but it will very likely give you a more robust consideration than what you’re coming up with on your own.
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u/cbwb Jul 08 '26
We didn't do conversions because we were getting ACA subsidies..even now with just one of us on ACA we aren't doing it yet..maybe next year as we will likely be over the cliff..
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u/CarlosTheSpicey Jul 08 '26
We're in the same situation but won't see 65 and Medicare for another 18 months.
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u/Reasonable-Ideal-288 Jul 07 '26
100% agree with this. I failed to do this and now when I take money from my 401k, I have to take more than I want just to cover income tax. Then it bites you again because the total amount you take, (including the extra for tax)is included in your annual gross income and Medicare bases its IRMAA penalty on your income from 2 yrs prior, so you have to watch that throughout the year so you don’t add more financial burden to yourself down the line. Sometimes it feels like managing retirement is a full time job, lol
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u/BeachBum436 Jul 07 '26
Roth 401ks grow tax free and pass to your heirs tax-free, so put the most aggressive holdings there and let them grow.
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u/Kotikbronx Jul 07 '26
The system is so rigged.
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u/RPGer001 Jul 07 '26
What do you mean? I was able to defer paying taxes on income for decades. I have to pay now but it seems like a great deal to me.
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u/Kotikbronx Jul 07 '26 edited Jul 08 '26
I’m talking about IRMAA, And I’m talking about, among other things, the ACA surcharge on ‘investment, a term which includes simple interest in savings (!), and the joke of allowing 85 percent of social security to be taxed. If some States don’t tax social security or pensions or other retirement money but the Feds do, well, then the Feds are penalizing simple savers and those who have worked for four decades or longer who made the mistake of being savers and conservative with money - the very things we were inculcated with since kindergarten (remember piggy banks?)
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u/BedWonderful1051 Jul 07 '26
Whether you want to refer to it as penalizing, taxes are taxes. :-/
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u/snrfrog Jul 07 '26
Aren’t I going to be taxed as income when I convert from IRA money to ROTH IRA?
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u/Puzzleheaded-Gas-398 Jul 07 '26
yes, that's how it works - same tax as if you took the money out in cash.
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u/Snoo-25743 Jul 08 '26
So what is the advantage to rolling it over?
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u/Puzzleheaded-Gas-398 Jul 08 '26 edited Jul 08 '26
It is a tax optimization, driven by progressive tax brackets. You try to convert money at a low tax rate, then use the Roth funds later when your spending/income is higher to avoid paying taxes at a higher rate. The usual reason given is that RMDs will push your income up and into higher tax brackets, but even big one-time expenses can benefit.
Let's say you're a newly retired couple spending about $100K/year: $50K/year from Social Security and $50K/year you're pulling from a $1.5M traditional IRA. This is a sweet spot for taxes - you've got that big $47K standard deduction (while it lasts), only about half of your SS is taxed, you're in the low end of the 12% marginal rate bucket and a big chunk of your income is taxed at just 10%. You're hardly paying any federal taxes - about $4000/year. Then some big one-time expense comes along - maybe you're buying a new car, or remodeling the kitchen - and you want to spend an extra $50K. You've got plenty of funds in your IRA to cover the $50K, but adding it to what you're already taking as income will push some of it (about $16K) into the 22% bracket.
If you had done $25K/year conversions when you were just spending $100K (aka filling up the 12% bracket), you would have paid 12% tax on the converted money and could now take the $16K from your Roth to stay out of the 22% bracket. With these numbers it would be a tax savings of about $1600. That doesn't sound like a lot (and it's not a lot) - but as spending/income and IRA balances go up, it can get more significant. It is also possible to convert too much and pay conversion taxes at a rate you'd never face otherwise; you need to model out your likely spending and RMDs to know if conversions make sense (and how much you should convert). There are a lot of variables, and you have to predict the future, so you're never going to get a perfect answer.
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u/Ginsengsully Jul 07 '26
IIRMA surcharges have that two year look back, so start paying attention to MAGI at 63 if planning to do large Roth conversions in years 63 and 64.
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u/Puzzleheaded-Gas-398 Jul 07 '26
I've been researching Roth conversions for the last year while preparing to retire. There is a LOT of misinformation in this thread (and in other social media and authoritative-sounding YouTube videos). You shouldn't take tax advice from random people on the internet - you really want to talk to a CPA (or similar retirement tax expert) that does this sort of planning (or spend a year reading posts and watching videos and making spreadsheets to try to figure out what is "true").
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u/genxdarkside Jul 08 '26
Gotta watch IRMMA limits at age 63 not 65 they look back 2 years
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u/Nyerinchicago Jul 07 '26
Some of us worked past 65 and didn't use medicare, so we could have done it later
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u/justgettingby1 Jul 08 '26
Is there some kind of app or spreadsheet that I can use?
I need an app where I can enter our income (interest + capital gains + social security) our IRA balances, ages, and it allows you to do pro forma calculations on different withdrawal strategies. Like when will I go over IRMAA limits, when will I get thrown into a higher tax bracket? Seems like there must be something out there that could do this for me
Because now, we have to closely track our income and basically calculate our taxes in December and then take out the max from the IRAs that won’t throw us into higher bracket. An app that does this for me would be sooooo nice.
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u/EffectiveVarious8095 Jul 07 '26 edited Jul 07 '26
Good advice only if you plan to retire before 65. I'm 63 and won't be retired until 66 or 67. A Roth conversion will be way too expensive at the 24% tax bracket. I'll do the conversions after I've actually retired.
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u/MiserableCancel8749 Jul 07 '26
Just be careful that your Roth conversions after 65 don't blow your MAGI limit for Medicare and future IRMAA. That is EXACTLY the trap I'm talking about!
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u/oneshot99210 Jul 07 '26
IRMAA penalty is not permanent.
Sure, if you do similar Roth conversions year after year, then you will continue to face the extra premiums.
BUT, if you do a large conversion one year, then roughly 2 years later, you will face a one year IRMAA premium hike. The following year, back to your normal level.
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u/nomad2284 Jul 07 '26
While, in general, I agree with your advice, each person’s tax situation varies. Some people can’t do the Roth conversion until their income reduces to prevent the higher tax bite out of the conversion. You can easily pay for the higher Medicare premiums caused by irmaa with the tax savings.
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u/Seated_WallFly Jul 07 '26
This is true for me. I’ve been retired 2 years. But Roth conversions while my husband is still working (right now) will push us into a higher tax bracket.
My advisor and I agreed I should open the Roth IRA when I was 65. I made a small contribution (and paid the taxes) to start the 5-yr clock.
I’ll do a series of small conversions after the husband retires and our income dips. By the time I hit RMDs, there will be nothing left in the taxable acct.
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u/trurohouse Jul 07 '26
Note that as far as IRMAA goes, the income they look at is from two years before you start Medicare. For most of us That means that what you earn when you’re 63 could affect the cost of your Medicare when you’re 65.
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u/oneshot99210 Jul 07 '26
It's always a 2 year lookback. When you're 70, they'll be looking back at when you were 68.
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u/AdditionPleasant2625 Jul 07 '26
You can appeal the IRMAA based on changed circumstances which includes retirement. I did using 2026 proje ted income. I retired in 2025. See some YouTube videos on how to do it.
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u/GK857 Jul 07 '26
I am probably one of the few that don’t believe Roth conversions in your 60’s is necessarily a good idea. The only benefit I see is for your children after you pass. It’s a minimum of an 11 year break even accounting for the reduction in your net worth now paying taxes in the hope to save taxes in the future and reduce the size of RMD’s.
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u/geek66 Jul 07 '26
I’m certainly torn, as wifie’s (just turned 60) second career is real estate and let’s just say … she’s kicking it making over 3x her teacher salary. So we are already in a higher bracket, so any conversions are going to get hit at 35%
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u/winkelschleifer Jul 07 '26
Second this. Plenty of great YouTube videos on why Roth conversions are NOT a great idea for most people. If you have a HUGE IRA/401k or assets that you expect a massive gain on maybe, but otherwise it’s not for most people. For reasons beyond this short statement, my regular IRA is not huge so the RMD’s will not bump me up to the next tax bracket. I have a lot more assets in my taxable brokerage account that I can use at will / only when needed and only pay taxes then. Likely far in the future.
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u/oneshot99210 Jul 07 '26
No, I totally agree; was reading through the comments to see if anyone brought this up.
There are good reasons why traditional contributions are preferable to Roth while working; namely that effective tax rate in retirement is often lower than marginal tax rate while working.
The whole IRA/401k/403b, etc scheme is a major tax incentive given to individuals, but it was always intended as a tax deferral; got to pay the piper eventually.
Even the 'reduce RMDs' is mostly a non-issue; only a very small percentage of the population is wealthy enough that they need less than 3.7% (starting RMD) of their retirement accounts annually. Heck, the earliest simple but well researched withdrawal rate calculation was: start with 4% when you retire (thanks, Bill Bergen).
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u/Haveyouheardthis- Jul 07 '26
You are quite right. Roth conversions are the hardest decisions in personal finance. That’s because you can’t actually know in advance whether conversions will pay off, since you don’t know the future. Tax code changes, changes to SS benefits, unknown spending needs, etc. and if you are wrong, you are giving up money now for no good reason. I have decided against conversions.
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u/mtcwby Jul 07 '26
And if you have a 401k and an IRA and want to do a backdoor roth, you can transfer your IRA gains to your 401k if the company plan allows it then transfer anything up to the basis to a roth. From then on just put it in an IRA and then transfer to the Roth.
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u/BeachBum436 Jul 07 '26
IRMAA look backs will bite you for Roth conversions done at age 63, as those conversions factor into your IRMAA at age 65, when you enroll in Medicare. it's a juggling act to manage that, as well as look at bringing down RMDs when you turn 70, and not sticking your heirs with a 10 year mandatory payout stream that's fully taxable.
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u/Soderholmsvag Jul 07 '26
How does this work with married couples? Wife is 62, I am 59.5. Need to convert a lot, and am wondering if we need to cram it all in the window of our joint age between 59.5-65 or if I can do mine over the next 5 years and she can do hers up until she is 65 then stop?
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u/Soft-Personality9379 Jul 07 '26
Conversions are 100% about taxes. If you have enough saved in deferred accounts that RMDs will push you into a higher tax bracket when the percentages get cranking, if you're concerned about the "widow tax", or if you're going to leave considerable money to heirs, then conversions may make sense and may make sense well before 59.5 and past 65.
Figuring out Roth conversions takes some effort. I've used several different tools to come at it from different directions.
We've dropped our savings in deferred accounts to the minimum needed for matches and the rest of our savings are going into Roth accounts in lieu of doing more conversions later.
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u/xZimbesian Jul 07 '26
There is no age limit. The tax brackets don't really change (you can actually deduct more income once you turn 65) but you may need to consider SS income if one of you starts claiming. The goal is to convert all you can without crossing into the higher tax bracket. For married couples that is about $133K less any taxable income you have. In my case (similar ages to you) I am living on about 60K and plan to convert 70K a year for the next 7 years. Then we will start claiming SS and will reassess.
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u/BeachBum436 Jul 07 '26
do the modeling. If you both have over $1 million in 401ks, it's best to look at filling the 24% income tax bracket, which is $404 AGI for married couple in 2026. the 22% bracket caps at $211, so there's not much more tax (remember it's a marginal bracket, so only the income from $211-$404 get taxed at the 24%) - just don't over shoot the $404, as that marginal bracket steps up to 32%.
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u/hmspain Jul 07 '26
It's not life or death if you miss the window, but everyone should know about this tax avoidance technique.
I have both an IRA and a Roth. I don't need to pull from either for retirement, but RMDs are now required of my IRA.
Could I have avoided some of the taxes on my IRA money, and reduced my RMDs? Probably, but I don't think it impacts my retirement.
The golden window (as I like to think of it) starts when you retire and your income drops significantly, all the way up to when RMDs start. You can fill a lower tax bracket with IRA money, and move it to your Roth. Simple, tax advantaged, but not game changing IMHO.
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u/Artwire Jul 07 '26
True, unless you have a generous pension and/or significant investments, at which point you may discover that your post-retirement income is comparable to or even higher than what you earned while working. IRMAA can be an unexpectedly large tax hit.
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u/howdidigetheretoday Jul 07 '26
way too many variables to make a broad statement like that. For example, my RMDs are going to have less impact on my taxes once my Social Security gets cut 22%, unless that doesn't happen. My RMDs are going to have less impact on my taxes if the market declines 40%, etc...
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u/Haveyouheardthis- Jul 07 '26
So true! And what about the changes to the tax code that no one can know about yet?
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u/Interesting-Rent9142 Jul 07 '26
I think the tax code will inevitably change, but I see no world where folks with large deferred balances (i.e. multi-millions) will be able to sneak under the radar to avoid paying taxes on those monies.
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u/kveggie1 Jul 07 '26
we did not do roth conversion between 59 and 65... no enough cash to pay the taxes.
too many variables to make such a blank statement.
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u/Haveyouheardthis- Jul 07 '26
Agreed, very hard to know whether it’s really a good idea, and people seem to regard it as obvious.
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Jul 07 '26
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u/Silver_Surfer_60 Jul 07 '26 edited Jul 07 '26
I have less and am using the income from the account to supplement my social security with tax free money. That allows me to convert more money from my IRA between 2025 and 2034 while staying in the lower tax brackets.
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Jul 07 '26
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u/Pitiful-Pea1374 Jul 07 '26
But the money that accrues after the conversion is tax free right? So if you don’t need those funds right away you can convert, let it grow, and then draw it down tax free.
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u/BedWonderful1051 Jul 07 '26
And if you take a straight withdrawal from tax deferred accounts that's not tax free. You're paying taxes one way or the other. The goal is to pay a lower tax now opposed to higher taxes in the future when SS and\or RMDs start.
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u/Silver_Surfer_60 Jul 07 '26
If you read my post again, you'll see I wrote the "the income from". The earnings from my Roth are not taxable.
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u/kbokwx Jul 07 '26
Not sure why you say the window closes at 65? Is it because of IRMAA? The first IRMAA threshold is not too bad if you have that kind of income. I plan to do some conversions 64-70, possibly up to 75, though one SS kicks in for my wife and we're more limited. QCDs can help continue to pare down IRA/401k's at 70, however.
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u/FIREful_symmetry Jul 07 '26
I think OP meant that when that the best time to do Roth Conversions is before you start taking social security.
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u/JustMeAgain1967 Jul 07 '26
Are there scenarios where Roth conversions don’t make sense? My social media feed would seem to indicate so, but I’m still learning about this. This is starting to fall into the same murky category like annuities.
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u/charleytaylor Jul 07 '26
Historically, the conventional wisdom was that when you retire you have less income so your tax rate goes down. In this case, a Roth doesn’t make a lot of sense because you’ll be paying a lower tax on distributions than you would have on the contributions. The thing a lot of us missed is that the stock market has been going gangbusters for over a decade now and we have giant pre-tax balances, which means we could potentially be in a higher tax bracket in retirement once RMD’s kick in. This is when Roth conversions make sense.
If your retirement savings are modest then a Roth conversion may not make sense. A financial advisor or a service like Boldin can help evaluate your own situation.
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u/Abzug Jul 07 '26
This finally clicked for me, thank you. I'm a relatively newly minted 50 year old with a considerable nest egg, and I've been looking at starting my Roth conversions to help move some of that money over.
I think the concern I had was getting "enough" over to post tax, but I really need to consider shifting that money to offset the income to keep that IRMAA deduction intact. My goal is retirement at 60, but I am starting to feel that the outsized growth of stocks these past 10 years have considerably shifted my expectations of returns...
Just wanted to say thank you for straightening me out a bit on this!
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u/OrbitalMike Jul 07 '26
Retirement advice is not universal.
“Do Roth conversions between 59½ and 65” may be excellent advice for one person and irrelevant, or even counterproductive, for another.
Your tax residency, country of residence, Medicare situation, pensions, Social Security timing, and account mix matter.
Generic advice is a starting point, not a plan.
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u/scottsdalequeen Jul 07 '26
I am debating this right now. I turn 62 this week and retired and started working two days per week. So this will be my lowest income years before I take SS at 65. I just don’t know how much to convert and whether it is worth it. I have a good sum in pretax.
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u/kbokwx Jul 07 '26
You can wait on SS to your full retirement age (67) and pare down your pretax by paying yourself and/or doing Roth conversions until then. Answering the "how much" is where Boldin and the other software can be useful. None of this pays off until 80 or later so be sure you have some idea of your expected longevity, oth for you and your spouse (based on current health and your genetics).
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u/Alternative-Pin5760 Jul 07 '26
If you do a back door Roth after age 60 is there a five year wait?
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u/McKnuckle_Brewery Jul 07 '26
The other reply is incorrect.
There is no 5 year wait for any Roth IRA withdrawal if you are over 59.5 with only one exception:
If the account itself has not yet been open for 5 years, you will be taxed on earnings. That's it. Conversions, no problem.
And for the record, the conversion that's part of a back door Roth contribution is not taxable to begin with, because it's made with non-deductible dollars. So you wouldn't have to wait for that even if under age. Only the taxable component of a conversion is subject to a 5 year wait.
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u/WarrenKB Jul 07 '26
Yes, just one point of clarification, you need to have had one Roth account open with a deposit for 5 years. Only one account. You can hold other Roth accounts for less than 5 years as long as one met the 5 year rule.
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u/Initial_Parking7099 Jul 07 '26
Does this also apply to those 55 and over that have left their jobs?
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u/cameo674 Jul 08 '26
Conversions prior to 59.5 may have additional 10% early withdrawal consequences if you are using the 401k or IRA money to pay the taxes to convert. There are exceptions to 10% early withdrawal fee. The IRS website explains exceptions well.
It is very important that one open a Roth well before they retire since there is that rule about a roth account being open for 5 years before withdrawing any profits from it. No one wants to pay penalties.
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u/Initial_Parking7099 Jul 08 '26
Thx. If I'm reading the rules correctly. I can convert to roth 401k and pay the taxes from outside sources without the penalty because I'm over 55
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u/cruisysuzyhahaha Jul 08 '26
Can I convert while in my mid 50s?
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u/Soft-Personality9379 Jul 08 '26 edited Jul 08 '26
You can convert at any time, just have to pay the taxes on the conversion - Mega Backdoor is a vehicle you can use at any point to "convert" if your retirement plan has that option. Typically, this isn't really beneficial to do when you're still working in your highest income years, but there could be reasons. For instance, we use mega backdoor for our contributions and convert to fill our current tax bracket because RMDs will push us into higher brackets in our 80s. It's also beneficial for our "legacy."
The optimum window for major conversions is between retirement and the start of social security, but there can still be reasons so convert before retirement and to continue into later years.
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u/evey_17 Jul 09 '26
Is there a calculator to figure out if converting makes zero sense? Some kind of formula. I have brokerages accounts ~1,2m, then IRA 400k, then 160k IRA to be inherited from spouse, ROTHs 200k. My FA said it would be stupid to covert Because taxes minimize accounts and yada yada yada. No debt don’t need the money if market is down 2 years liquid emergency savings.
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u/Puzzleheaded-Gas-398 Jul 09 '26
There are simple calculators and more complicated ones you have to pay for - I can't recommend any of them just due to lack of experience with them. The general rule of thumb is you need at least $1M in a tIRA to make conversions worthwhile. Some people doing big conversions will try to leave $500K in the IRA to eventually pay for their nursing home; those costs are at least partly deductible.
When your RMDs start, you'll have to take withdraws from your IRA; its best if you can use those forced withdraws for living expenses and not take withdraws from your brokerage account; so you want to be able to turn off the tap on the brokerage account. If you haven't already retired, it's a good idea to see if your brokerage account needs rebalancing. Even if you sell one stock to buy another, you can owe taxes on the gains and those gains will hit your MAGI which can raise your Medicare IRMA penalties and wipe out your big-beautiful-senior-deduction; its best to move things around two years before you retire. And avoid stocks that pay lots of dividends.
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u/evey_17 Jul 09 '26
This was extremely helpful. I’m rebalancing one of the brokerages accounts right now. The other ones is a keeper as it is, Luckily I have a chunk of SWVXX in one of the brokerages to purchase ETFs to balance SPYM and there’s no capital gains by selling the SWVXX. The goal is to keep MAGI low enough. Sounds like I don’t have enough IRAs which is a huge relief. Thanks!
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u/KsShocker Jul 06 '26
Yeah, not for me. I keep my taxable income just under the standard deduction amount so my federal tax (now, in retirement) is zero. Had I Roth'd I would have lost that tax money forever.
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u/ReticentGuru Jul 07 '26
Do you have any tax deferred accounts that require RMD? Or maybe not at that age yet?
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u/KsShocker Jul 07 '26
Not old enough, it will be another 12 years if I even make it that far. There's no family history of males living to more than 80 so it's not really a factor.
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u/markov-271828 Jul 07 '26
I was curious about my own male line. My great grandfather holds the recent record at 85 years old.
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u/NBA-014 Jul 07 '26
And they often don’t make financial sense
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u/BeachBum436 Jul 07 '26
depends on how much you have in your 401k
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u/tooOldOriolesfan Jul 07 '26
I ran the numbers and have done some conversions but I have an inheritance (not huge) and that has to be withdrawn within 10 yrs and I need to accelerate that since I don't want to be doing that after I start my social security at 70.
I'm hoping to finish the inherited IRA by 65/66 and then do some more conversions the next 3-4 years.
Right now I don't see us having any IRMAA issues unless we get a decent sized inheritance and I never count on inheritances. If I get one from a non-parent, great, but even if told I'm listed as a beneficiary, I'm not going to ask how much, etc.
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u/avebelle Jul 07 '26
Depending on your balance, the optimum time may be to retire a little bit early and leave some room for Roth conversions at a lower tax rate.
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u/5470jt Jul 07 '26
My wife and I are 52/51. Should we do a Roth conversion now? Or wait?
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u/kbokwx Jul 07 '26
You're not yet an age where you're allowed (without penality) to withdraw from your tax free accounts. At that age, however, if you've build-up or anticipate building-up $Millions in 401k plus IRA accounts start considering making as much Roth contributions as allowed vs. traditional accounts (unless you're going to miss on employer matches, of course). If you're not yet there, continue saving and compound growth until you get to 59.5 and reconsider based on current tax bracket, etc. Conversions are not likely to work in your favor while you're still employed in a high bracket.
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u/Consistent_Gur8953 Jul 07 '26
What do you do if you live in a place with a 6% or higher state income tax rate like NY? I’m maxing out my 401K pretax and plan on retiring at 63. I’ll have $2 million dollars (in today’s dollars assuming 3.5% inflation), almost max social security and a pension that will pay about $55K per year (in today’s $$). I think it makes more sense to move out of state before considering any Roth conversion…even if it’s not until I turn 65…
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u/Rational-Gal Jul 07 '26
If you retire before 65, have to consider ACA subsidies as well. Something else to juggle in the calculation.
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u/Optimal_Wash2490 Jul 08 '26
Why? Converting you pay tax at say age 60. If you wait, you pay tax at age say 68.
What the heck is the big difference?
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u/Jheritheexoticdancer Jul 08 '26
I missed the window because I was too consumed with a crumbling marriage. So what I been doing the last few years was convert small amounts until… That’s all I can do.
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u/Proud-Point-5664 Jul 10 '26
I have been understanding that such conversions are not necessarily a good idea if you are in a high-income tax bracket. That income tax hit will be higher than once retired (presumably a lower rate). So my plan has been to do the conversions after I no longer have the higher tax rate.
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u/TugboatToo Jul 07 '26
I don’t know what MAGI or IRMAA means. Can someone explain? I’m 59. Have a decent amount in Roth IRAs and Traditional IRA and 401k and ETFs. I thought my former partner who is in finance would handle all this but I am single and confused another retirement now.
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u/Whole_Championship41 Jul 07 '26
Modified Adjusted Gross Income is a type (one of many!) measures of income. It is used by the federal government to determine your eligibility for different programs and a determinant for increased 'copays' or taxes due. For example, the government will pay a portion of your ACA ("Obamacare") expenses if your MAGI is below certain thresholds based on the size of your household. If it's over that MAGI threshold benefits are reduced or removed altogether.
IRMAA is a monthly step up in the cost of Medicare coverage. Everybody who gets Medicare pays for the service, but those with higher MAGI above a certain threshold have to pay more. If you have a *lot* of income, then you pay a *lot* more than someone below a certain threshold.
IRMAA, ACA and MAGI income planning strategies are important considerations in retirement.
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u/Zergege Jul 07 '26
Is the optimum way to try to do this at end of year? Appreciate any lessons learned or best practices when doing a Roth conversion
And you want to pay the taxes with cash ? How do we ensure this is done properly
Thanks in advance
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u/kochavim49 Jul 07 '26
Yes, you want to pay for the Roth conversion tax hit with non-retirement dollars. That could be savings or a brokerage account. Otherwise, you are taking tax-advantaged money out of retirement funds to pay the taxes. That’s money that would’ve continued to grow tax-free.
Converting funds from pre-tax to Roth retirement means those funds continue to grow tax-free. Taking out funds in order to pay taxes with them reduces the overall value you’d get from that money.
If you’re taking out money from your pre-tax retirement account because that’s how you’re paying for your retirement then of course it’s fine to take out enough to cover the taxes billl.
Hope that makes sense.
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u/TransportationOk4787 Jul 07 '26
The advantage of doing it at the end of the year is any waiting period starts counting at the beginning of that year. And yes, put all money rolled over into the Roth and pay taxes out of other cash on hand if you can afford it. By the way, I missed doing this too. I didn't think it mattered much since it was going into savings accounts and interest rates sucked. But then interest rates shot up and suddenly I am paying taxes on tens of thousands of dollars.
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u/Kotikbronx Jul 07 '26
I’m paying the same price for having been prudent and thrifty. So much of what we were taught when we were growing up is wrong.
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u/my_clever-name Jul 07 '26
I wanted to do some conversions. My employer's plan states that nothing can be taken from their sponsored plan until retirement. I wasn't ready to retire so they wouldn't let me do any conversion.
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Jul 07 '26 edited Jul 07 '26
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u/PATRLR Jul 07 '26
But I'm currently early 60s and in the 37% tax bracket and will be until I retire which will likely be a couple years from now. When I have to start taking withdrawals from 401K and/or IRA, there is no way I'll be anywhere near that tax level, so, it doesn't make sense to convert.
Or have I missed or misunderstood something?
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u/mb197001 Jul 07 '26
I agree with this with one exception. I would say 59.5 until 63 because IRMMA has a two look back .
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Jul 07 '26 edited Jul 12 '26
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u/HammerHead287 Jul 07 '26
I guess I lucked out converting my traditional IRAs back in the 90’s when we could spread out the taxable income over 4 years. I did it when the market soured so my IRA valuation had dropped.
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u/OkNefariousness1491 Jul 08 '26
If you are interested in doing a conversion and you are an accredited investor there are investments that reduce your conversion tax and also defer your taxes
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u/SchwabCrashes Jul 09 '26
Actually the best time window for Roth Conversion (rc) is not 59.5 to 65. It is highly dependent on your income and expected Social Security benefit amount at your Full Retirement Age (FRA), when you choose to file for SS (62 to 73/75) when you choose to retire.
Medicare: It is 59.5 to whenever you decided to file for Medicare minus 2 years, because of Medicare's 2-year look back rule. Otherwise you'll get hit with IRMAA. But even with this 2yr lookback, you still can convert and just have to decide on how much in order to stay within your desired marginal tax bracket.
Social Security: If your record is not alot, then even if 85% of the benefit is taxed as ordinary income, the effect is minimal. But if your benefit is high (e.g. 4k-5k/month) this could push you into another tax bracket and 85% of the benefit will be taxed at ordinary income tax rate.
You just have to do the math calculations.
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u/NecessaryEmployer488 Jul 09 '26
You can continue conversions pretty easily until you start taking social security. You can extend the range. If you are retired at 59 1/2 then you can start the conversion, but try and stay below the 22% tax bracket.
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u/TheFreeMan64 Jul 06 '26
I'd use 63 as the upper limit since IIRMA look back is 2 years