Learn how Roth conversions from IRAs and 401(k)s can lower lifetime taxes, reduce RMDs, and create tax-free income in retirement.
For many retirees, taxes quietly become one of their largest ongoing expenses.
Every dollar you withdraw from a traditional IRA or 401(k) is taxable.
Required Minimum Distributions (RMDs) can push you into higher brackets.
Social Security may be taxed.
Even Medicare premiums increase if your income climbs too high.
That’s why one of the most effective tools in retirement planning today is the Roth conversion—turning taxable savings into tax-free income for life.
“A Roth conversion sounds like a pain in the neck. Is it really necessary to go through with it?”
We get this one a lot—and the short answer is: It depends on timing, but yes, it can be worth the effort.
Roth conversions give you control over when and how you pay taxes—on your terms, not the IRS’s. They’re not about beating the system; they’re about making it work more efficiently for you.
A Roth conversion simply means moving money from a tax-deferred account (like a traditional IRA) to a Roth IRA.
You’ll pay income tax on the amount you convert now—but once in the Roth, it grows and comes out completely tax-free.
Example:
You convert $50,000 from your IRA to a Roth this year.
That $50,000 adds to your taxable income today, but from then on, every penny of growth and every withdrawal is tax-free.
Think of it like paying taxes on the seed so you never have to pay on the harvest.
Even after Congress extended the 2017 Tax Cuts and Jobs Act brackets, today’s top marginal rates (10%–37%) remain near 40-year lows. With record deficits and Social Security funding pressure, rates could easily rise over the next decade.
For many retirees, converting during low-bracket years offers peace of mind — you’re locking in taxes at rates we know today rather than rates that might rise later.
At age 73 (or 75 if born in 1960 or later), the IRS forces withdrawals from pre-tax accounts.
These RMDs can spike your taxable income, affect your Medicare premiums, and limit your flexibility.
Each dollar converted to Roth before then reduces future RMDs.
Medicare premiums (IRMAA) rise once income crosses specific thresholds.
Doing smaller, strategic conversions in lower-income years helps manage those costs.
Your heirs must empty inherited IRAs within 10 years (thanks to the SECURE Act).
Leaving them a Roth IRA instead can save them thousands in taxes and avoid overpaying the IRS.
A Roth conversion doesn’t just affect your tax bill—it can also impact Social Security and Medicare premiums.
Tip: Plan ahead. Strategic conversions before enrolling in Medicare or while delaying Social Security often produce the biggest savings.
If giving is part of your plan, you may already have a powerful tax strategy at hand:
If a significant portion of your IRA will go to charity, a Roth conversion might not be necessary.
Before converting, ask yourself:
✅ What’s my tax bracket today—and what is it projected to be later? Do a projection for single filing if married filing jointly now too.
✅ How close am I to the next Medicare or tax bracket threshold?
✅ How long can I let the money grow tax-free?
✅ Do I have cash outside retirement accounts to pay the taxes?
Running a multi-year projection—instead of a one-year snapshot—helps determine how much to convert each year from a tax planning perspective as well as portfolio growth.
Meet Tom and Lisa:
They want to maintain about $90,000/year in total spending—including living expenses, healthcare, and taxes.
Before Social Security and RMDs begin, their income comes from:
Their taxable income after deductions is roughly $8,000
They use the taxable brokerage account to fund their lifestyle and pay taxes on conversions.
Their planner runs a multi-year projection and identifies to convert at least $100,000 per year from their IRAs to a Roth IRA each year while evaluating it in Q4 at the end of each year for a more accurate amount.
Each year, they:
They coordinate conversions before claiming Social Security—avoiding taxation overlap and keeping flexibility later.
They plan to give most or all of their money to their kids so want to covert a good portion. They will also consider doing QCDs starting at age 70.5.
Roth conversions aren’t right for everyone—but when used strategically, they can:
At Ignite Financial, we help retirees and near-retirees design tax-smart income plans to maximize what they keep and minimize what goes to the IRS.
Most retirees pay more tax than they need to—simply because they never plan their withdrawals.
A quick conversation could reveal how much you might save with a Roth conversion strategy tailored to you.
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Roth conversions often make the most sense in low-income years — such as the years between retirement and when Required Minimum Distributions (RMDs) or Social Security benefits begin.
They can also be smart after a market downturn, when account values are temporarily lower, or during early retirement (FIRE years) when your income is intentionally reduced.
The amount you convert from a traditional IRA or 401(k) is added to your taxable income for that year.
You pay ordinary income tax on the converted amount — but no early withdrawal penalty applies if the funds go directly into a Roth IRA.
Ideally, pay the taxes from cash or a taxable account, not from the IRA being converted, so the full amount continues to grow tax-free.
Yes. Roth conversions increase your Modified Adjusted Gross Income (MAGI) for the year, which can affect your Medicare IRMAA premiums two years later.
Working with your financial planner to monitor income thresholds helps prevent unwanted premium increases.
The conversion amount increases your combined income, which can make up to 85% of your Social Security benefits taxable in that year.
That’s why many retirees complete conversions before claiming Social Security, when they have more control over income levels.
Both can be converted to a Roth IRA, but 401(k) conversions usually require a rollover to an IRA first (unless your plan allows in-plan Roth conversions).
An advisor can help you compare options, coordinate timing, and ensure there’s no unnecessary withholding.
Not at all. Many retirees do partial conversions over several years — often between ages 60 and 70 — to stay within favorable tax brackets and minimize Medicare impacts.
This approach can significantly lower lifetime taxes and provide long-term flexibility.
Yes. If you itemize deductions, Donor-Advised Fund (DAF) contributions or large charitable gifts in the same year as a conversion can help reduce your taxable income.
Once you reach age 70½, Qualified Charitable Distributions (QCDs) let you give directly from your IRA to charity — keeping that amount off your tax return altogether.