Roth Conversion Strategy for Pre-Retirees: How to Reduce Your Tax Bill Before RMDs Begin

Feb 23

If you have $1 million or more sitting in a traditional 401(k) or Individual Retirement Account (IRA), you have a tax problem you may not fully see yet.

Every dollar in those accounts has never been taxed. And at some point, the IRS is going to require you to take it out, whether you need it or not. When you do, it becomes ordinary income. Depending on how much you've accumulated, those forced withdrawals could push you into a higher tax bracket, make more of your Social Security taxable, trigger higher Medicare premiums, and leave a significant portion of your estate to the IRS instead of your heirs.

The good news: there's a window of time, often spanning 5 to 15 years, where you can do something about it. That window is the Roth conversion opportunity, and for most pre-retirees it's the single most valuable tax planning strategy available.

This post covers:

What a Roth conversion is and how it works
Why the years before Required Minimum Distributions (RMDs) are the ideal time to convert
How to calculate how much to convert each year
How conversions interact with Social Security, Medicare, and the new senior deduction
A real example showing the potential tax savings
Common mistakes to avoid

What Is a Roth Conversion?

A Roth conversion is the process of moving money from a traditional IRA or 401(k) into a Roth IRA. You pay income tax on the amount converted in the year of the conversion, and in exchange, that money grows tax-free and can be withdrawn tax-free in retirement with no RMDs during your lifetime.

There is no limit on how much you can convert in a given year, and there is no income limit on who can do a Roth conversion. This is different from direct Roth IRA contributions, which phase out at higher income levels. Anyone with a traditional IRA or 401(k) can convert regardless of income.

The mechanics are straightforward: you tell your IRA custodian you want to convert a certain amount, they move it to a Roth IRA, and you receive a 1099-R at tax time showing the converted amount as taxable income for that year.

Why the Pre-RMD Window Is the Best Time to Convert

The Roth conversion strategy works best when you have a temporary period of lower-than-usual taxable income. For most people with significant pre-tax retirement savings, that window opens when they retire and closes when RMDs begin.

Here is why this window is so valuable:

1. Your income drops when you retire. While you're working, your income is high and Roth conversions would be taxed at high rates. Once you retire, before Social Security and RMDs kick in, your taxable income often falls significantly. You may be in the 12% or 22% bracket for the first time in years.

2. RMDs will force withdrawals at higher rates later. At age 73 (or 75 if born in 1960 or later), the IRS requires you to withdraw a specific amount from your traditional accounts each year regardless of whether you need the money. For someone with a $2 million IRA, the first RMD is approximately $75,000 to $80,000. On top of Social Security and any other income, that can easily push a married couple into the 22% or 24% bracket permanently.

3. You control the tax rate now; the IRS controls it later. Converting in the pre-RMD window lets you choose how much income to recognize each year and at what rate. Once RMDs begin, that control is largely gone.

4. The tax code could change. The current individual income tax rates are historically low by modern standards. If rates rise in future years, converting at today's rates becomes even more attractive. Converting now is essentially a bet that today's rates are favorable relative to future rates, a bet many tax experts would take.

The Real Cost of Waiting: A Concrete Example

Let's look at a real example to show what's at stake.

Meet David and Susan, both age 62.

David recently retired. Susan plans to retire at 65.
Combined traditional 401(k) and IRA balance: $2,000,000
Expected Social Security at age 67: $60,000 per year combined
No Roth accounts currently

Scenario A: No Roth conversions. They take no action during the pre-RMD years. At age 73, the IRS calculates David's first RMD at roughly $78,000 based on the account balance and life expectancy tables. Combined with $60,000 in Social Security, of which up to 85% may be taxable, and some investment income, their taxable income likely lands around $130,000 to $150,000 per year. They are in the 22% to 24% bracket for the rest of their lives, and their heirs inherit a large pre-tax IRA that must be fully drawn down within 10 years and taxed at the heirs' rates.

Scenario B: Strategic Roth conversions. Between ages 62 and 72, they convert $80,000 to $100,000 per year to Roth, filling up the 22% bracket each year without spilling into the 24% bracket. Over 10 years they convert $800,000 to $1,000,000 to Roth. Their remaining traditional IRA balance at age 73 is significantly smaller, their RMDs are lower, less of their Social Security is taxable, they avoid Income-Related Monthly Adjustment Amount (IRMAA) surcharges on Medicare, and they leave their heirs a large Roth account that can be withdrawn completely tax-free.

The projected lifetime tax savings in a scenario like this can easily exceed $100,000 to $200,000 depending on account size, life expectancy, and future tax rates. And that's before counting the benefit to heirs.

How Much Should You Convert Each Year?

The goal is not to convert as much as possible. The goal is to convert the right amount each year to minimize your lifetime tax bill. That usually means filling up a specific tax bracket without spilling over into the next one.

Here is a five-step framework for thinking through it:

Step 1: Estimate your baseline taxable income. This includes any pension, part-time work income, investment income, and any Social Security you're already receiving. Subtract your standard deduction and the new senior deduction if you're 65 or older to get your estimated taxable income before conversions.

Step 2: Identify your conversion target. Look at where your baseline income sits in the tax bracket chart. The space between your baseline income and the top of the 22% or 24% bracket is generally your conversion sweet spot. Converting up to the top of the 22% bracket, for example, means you're paying a known, moderate rate on dollars that would otherwise be taxed at unknown higher rates later.

Step 3: Check for IRMAA thresholds. Medicare IRMAA surcharges kick in at specific Modified Adjusted Gross Income (MAGI) thresholds. In 2026, the first IRMAA tier for married couples filing jointly starts at $218,000. A large conversion that crosses an IRMAA threshold can add thousands in Medicare premiums two years later due to the two-year look-back rule. Factor this in before finalizing your conversion amount for the year.

Step 4: Consider the new senior deduction. If you're 65 or older, the new senior deduction (up to $6,000 per eligible person) reduces your taxable income. But it phases out between $150,000 and $250,000 for married couples filing jointly. A large Roth conversion that pushes your income above $150,000 starts to reduce this deduction, which effectively increases your marginal rate on the conversion dollars above that threshold. In some cases it's worth keeping conversions just below $150,000 to preserve the full deduction.

Step 5: Run the numbers across multiple years. Roth conversions are most effective when done consistently over several years rather than in one large lump sum. Spreading conversions allows you to control your bracket each year, avoid one-time spikes that trigger IRMAA or other thresholds, and adapt as your situation changes.

The Social Security Interaction

Here is a nuance that surprises many people: if you are already receiving Social Security, a Roth conversion increases your provisional income, which can make more of your Social Security benefit taxable.

Your provisional income is your Adjusted Gross Income (AGI) plus tax-exempt interest plus 50% of your Social Security benefits. For married couples filing jointly, once provisional income exceeds $44,000, up to 85% of Social Security becomes taxable. A conversion that pushes you across this threshold creates a situation where each additional dollar of conversion income is effectively taxed at a higher rate because it simultaneously makes more of your Social Security taxable.

This is one of the strongest arguments for doing Roth conversions before claiming Social Security. In the years between retirement and Social Security, you often have much more room to convert at lower effective rates.

For a full breakdown of how Social Security is taxed and how provisional income is calculated, see our guide to how retirement income is taxed in 2026.

The Medicare IRMAA Interaction

Medicare Part B and Part D premiums are based on your income from two years prior. This is called the Income-Related Monthly Adjustment Amount (IRMAA), and it is one of the most common surprise costs in retirement planning.

In 2026, a married couple with MAGI above $218,000 (based on 2024 income) pays higher Medicare premiums. The surcharges are tiered and can add up to several thousand dollars per year at higher income levels.

A large Roth conversion can push you across an IRMAA threshold. This does not mean you should not convert, but it does mean you should model the two-year look-back impact before deciding how much to convert in any given year. Sometimes converting $5,000 to $10,000 less in a particular year keeps you under a threshold and saves more in avoided IRMAA surcharges than you would have gained in additional conversion capacity.

The Benefit to Your Heirs

A Roth IRA is one of the best assets you can leave to your children or other heirs.

Under current rules established by the SECURE Act, non-spouse beneficiaries who inherit a traditional IRA must fully withdraw it within 10 years. If your heirs are in their prime earning years when they inherit, those withdrawals get stacked on top of their own income and taxed at their marginal rate, which may be high.

A Roth IRA inherited under the same 10-year rule still must be withdrawn within 10 years, but those withdrawals are completely tax-free. The difference in after-tax value to your heirs can be enormous depending on the size of the account and the heirs' tax bracket.

Common Roth Conversion Mistakes to Avoid

Converting too much in one year. A large conversion that pushes you into the 32% bracket or triggers an IRMAA surcharge tier may not be worth it. The goal is filling lower brackets, not emptying your traditional IRA as fast as possible.

Paying the tax bill from the converted funds. If you withhold taxes from the converted amount, you lose the compounding benefit of that money. Ideally, taxes on the conversion are paid from a taxable brokerage account rather than from the converted funds themselves, keeping the full converted amount in the Roth growing tax-free.

Converting while Social Security makes it expensive. As described above, conversions while already receiving Social Security can push more of your benefit into taxable territory. Ideally conversions happen before you claim Social Security, or are sized carefully to avoid the provisional income thresholds.

Ignoring the five-year rule. Roth conversions are subject to a five-year holding period before the converted principal can be withdrawn penalty-free if you are under age 59½. If you are already over 59½, this is generally not a concern for the converted principal. However, the five-year clock on earnings still applies until the Roth account has been open for five years. If you are close to 59½ or plan to access the money soon after converting, understand how the rules apply to your situation.

Doing it without a multi-year plan. Roth conversion strategy is one area where doing something is not always better than doing nothing. Converting the wrong amount, at the wrong time, in the wrong year can cost more than it saves. Running the numbers across your full retirement timeline before converting is essential.

Frequently Asked Questions

Can I do a Roth conversion if I'm still working? Yes. There is no requirement that you be retired to do a Roth conversion. However, if your income is still high while working, the conversion will be taxed at your current marginal rate. Most people find conversions are most valuable in the first few years after retiring, before Social Security and RMDs begin.

Is there an income limit on Roth conversions? No. Unlike direct Roth IRA contributions, which phase out at higher incomes, Roth conversions have no income limit. Anyone with a traditional IRA or 401(k) can convert regardless of how much they earn.

What if tax rates go down in the future? It is possible. If rates fall, the conversions you did were taxed at a higher rate than necessary. This is a real risk, which is why most planners recommend converting to fill brackets rather than doing all-or-nothing conversions. Spreading conversions across multiple years also hedges against this uncertainty.

Can I convert a 401(k) directly to a Roth IRA? Generally, you need to roll a 401(k) to a traditional IRA first and then convert to Roth. Some plans do allow in-plan Roth conversions if they offer a Roth 401(k) option. Check with your plan administrator to understand what your specific plan allows.

How do I pay the taxes on the conversion? The converted amount is added to your taxable income for the year. You can have taxes withheld at the time of conversion or make a quarterly estimated tax payment. Using money from outside your retirement accounts to pay the taxes is generally the better approach, since withholding reduces the amount that makes it into the Roth and compounds tax-free over time.

How does this interact with the financial milestones in my 50s and 60s? Closely. The Roth conversion window overlaps with several of the key milestones covered in our financial milestone guide, including the penalty-free withdrawal window at 59½, the super catch-up contribution years from 60 to 63, and the Social Security claiming decision at 62 to 70. Getting these decisions coordinated is where the real planning value comes from.

In Closing

For pre-retirees with significant traditional 401(k) or IRA balances, the years between retirement and the start of RMDs are a genuinely valuable planning opportunity that most people never fully use.

Roth conversions done thoughtfully during this window can reduce your lifetime tax bill, lower your future RMD burden, reduce Medicare premium surcharges, decrease how much of your Social Security is taxed, and leave your heirs a significantly better inheritance.

The math does not work the same way for everyone. The right conversion amount depends on your account balances, your expected income in retirement, your state's tax treatment of retirement income, your Social Security timing, and your estate goals. But for most people with $1 million or more in pre-tax accounts, doing nothing during this window is the most expensive choice available.

If you'd like to see what a Roth conversion strategy could look like for your specific situation, we'd be glad to run the numbers with you.

To your Atomic Retirement,

Ryan Kilkenny

P.S. If you have a question or would like help planning for retirement, you can schedule an appointment here.

Atomic Planning is a veteran-owned registered investment advisor. This content is for informational purposes only and is not personalized tax or investment advice.