A 70-Year-Old With a $1.5 Million IRA Has a Narrow Roth Conversion Window Before RMDs Start, and Advisors Recheck the Numbers Each Fall

A $1.5 million IRA can appear well positioned at age 70, but a birthday only a few years away can set off a chain of tax changes that quickly ends the chance to convert cheaply. Advisors often run the same late-year projection to see how much room remains.

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Advisors frequently see a client profile like this in the fall: a 70-year-old widower filing as single, with a $1.5 million traditional IRA, a $50,000 pension, and $36,000 a year in Social Security. For now, his tax return looks manageable, and he remains in the 22% bracket.

That stability ends on a fixed schedule. Under required minimum distribution rules in Section 401(a)(9), withdrawals begin at age 73, and the IRS life-expectancy table determines the amount. His first RMD will by itself use up the rest of his 22% bracket. That leaves the three intervening years as his final opportunity to convert to a Roth at 22%.

His First RMD Pushes Past the 22% Bracket Immediately

If the IRA earns 6% a year and nothing is converted, the account would grow to $1,786,524 by the end of the third year. Using the IRS life-expectancy divisor of 26.5 at age 73, the first RMD would be $67,416.

Now add up his income using 2026 as a proxy. Brackets will rise with inflation, and the account balance will likely be larger by then as well. His pension plus the taxable 85% of his Social Security, or $30,600, totals $80,600. After subtracting the 2026 standard deduction of $16,100 and the extra $2,050 deduction for filers age 65 and older, taxable income comes to $62,450.

For single filers in 2026, the 22% bracket tops out at $105,700. That leaves $43,250 of available space. The RMD consumes all of it and sends another $24,166 into the 24% bracket. Because tax brackets work like fill lines, only the amount above the line is taxed at 24%. The issue worsens over time as the divisor keeps shrinking.

Why Advisors Rebuild the Calculation Every Fall

A Roth conversion is taxed in the year it occurs, so the deadline is December 31. Since 2018, it cannot be undone, because federal law bars recharacterizing it. That is why advisors often wait until late in the year, when income is largely known, and then convert as much as makes sense.

Another factor is the temporary senior deduction available in 2026, which can reach $6,000. It phases down by 6% of MAGI above $75,000. At this income level, he would retain $5,664 of it. Every dollar converted also reduces that deduction by 6 cents.

To fully use the 22% bracket, he would convert about $46,145 and owe roughly $10,761 in federal tax. That creates an effective tax rate of 23.3%. Because the deduction disappears after 2028, the available room at age 73 is smaller than it is now.

A $109,000 Medicare Threshold Turns the Last Dollars Into More Expensive Ones

A full conversion would raise his AGI to about $126,745. Medicare uses income from two years earlier to determine premiums, so his 2026 income would affect his 2028 bill. Based on 2026 thresholds, single filers above $109,000 pay an additional $81.20 a month for Part B and $14.50 for Part D. This tier acts like a cliff: crossing it by $1 adds $1,148.40 for the year.

For that reason, advisors compare two scenarios. If he converts $28,400, he stops at the threshold and pays about $6,623 in tax. Converting the next $17,745 costs about $5,287 once the Medicare surcharge is included, for an effective rate of 29.8%. The decision is close, because at age 73 his AGI of $148,016 would place him in tier 2 anyway, which means monthly surcharges of $202.90 for Part B and $37.50 for Part D, or $2,884.80 per year.

Once RMDs Begin, the First Dollars Out Cannot Be Converted

Treasury rules close the low-tax window. Under 26 CFR 1.408A-4 and A-6, an RMD cannot be converted, and the first dollars taken from the account each year count toward the RMD until that obligation is satisfied. After the RMD is met, additional dollars can still be converted, but they start at the 24% bracket. If the RMD is skipped, the excise tax is 25% of the amount missed.

Three annual conversions would reduce his first RMD to about $61,872, which is still greater than his room in the bracket. The benefit of converting is mainly later in life. Roth IRAs do not have lifetime RMDs under 26 U.S.C. § 408A(c)(4), and heirs inherit assets that have already been taxed. CNBC noted that beneficiaries of traditional IRAs can face a tax bill instead.

Three Checks Advisors Run Before Year-End

1. Advisors first project income for the coming year, including interest and capital gains. The conversion amount is usually whatever remains below the 22% line or the IRMAA threshold.
2. Many advisors pay the conversion tax from a taxable account, since every dollar withheld from the IRA is a dollar that never makes it into the Roth.
3. For a client like this, the same review is repeated in each of the following years, with brackets and IRMAA tiers revisited late in the year.

State income tax can change the outcome, since most states that tax income treat a conversion as ordinary income. Before the year ends, a three-year projection like this is worth reviewing with a fiduciary financial advisor or CPA.