The Roth Conversion Window Most Pre-Retirees Miss

You spent decades building a large traditional IRA or 401(k), deferring taxes the whole way. What most people don't realize is that the years right after they stop working, before Social Security is maximized and before required minimum distributions begin at age 73, can be the single cheapest stretch to move that money into Roth. Miss it and you may pay more in taxes on the same dollars than you ever needed to.

The Bracket-Filling Math

When you retire at, say, 62 and delay Social Security to 70, your taxable income can drop dramatically. If your only income is a modest pension or some portfolio interest, you might find yourself well inside the 12% or 22% federal bracket with room to spare. The question is: how much can you convert before crossing into 24%?

In 2026, the 22% bracket for married filers runs up to roughly $206,700 of taxable income (after the standard deduction of around $30,000 for a couple both over 65). That means a couple with $40,000 in other income could convert close to $135,000 in a single year and never leave the 22% bracket. Do that for five or six years and you've moved $600,000 or more into Roth at a rate that will almost certainly be lower than what RMDs would force in your 70s.

Two Tripwires: ACA Subsidies and IRMAA

The math gets more interesting, and occasionally painful, when you layer in two income thresholds that don't make the evening news.

If you're retired but not yet on Medicare, your household likely buys coverage through the ACA marketplace. Premium tax credits phase out as your modified adjusted gross income rises above 100% of the federal poverty level, and for a couple in their early 60s that line sits somewhere around $22,000 to $24,000. A large Roth conversion can wipe out thousands of dollars in subsidies, effectively raising the marginal cost of that conversion well above 22%. Run the numbers before converting in a year when ACA credits are meaningful.

IRMAA, the Medicare surcharge on Part B and Part D premiums, creates a similar tripwire two years later. A conversion that pushes 2026 income above $212,000 for a married couple will raise your 2028 Medicare premiums by roughly $750 per person per year. That's not a reason to avoid conversions; it's a reason to size them carefully.

How State Taxes Change the Answer

Federal brackets are only half the picture. Some states, including Pennsylvania and Illinois, exempt retirement income from state tax entirely. If you live in one of those states during your early retirement years but plan to move later, converting now means you permanently avoid state tax on that growth. Conversely, if you live in a high-tax state like California or New York today but plan to retire to a no-income-tax state, it may pay to wait. Converting $100,000 in California costs an extra $9,300 in state income tax versus doing the same conversion in Nevada or Florida. Geography is a real planning lever here.

What to Do Before Year-End

Pull your last two years of tax returns and estimate your income for this year. Identify the gap between your current taxable income and the top of the 22% bracket. Then check whether you're on ACA coverage and what a $50,000 or $100,000 conversion does to your subsidy. That single calculation will tell you whether this window is open, how wide it is, and how long you have before RMDs start closing it on their own.

The information provided is for educational purposes only and does not constitute investment, legal, or tax advice. Consult with qualified professionals for guidance specific to your situation.