At 63 With a $960,000 IRA? How Roth Conversions Can Help Turn Future RMDs Into $4,700 a Month Tax-Free

A single filer and a married couple can each convert a $960,000 IRA, but one may run into a hidden Medicare surcharge while the other stays below it. Before moving any money, it helps to know where the tax trap is and why it matters.

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At 63, you may have spent years saving, rolling a 401(k) into an IRA, and watching it grow to $960,000. The catch is that the money is tax-deferred now, but every dollar will eventually be taxed when withdrawn, and the IRS will force those withdrawals at a certain point.

Those mandatory withdrawals are known as required minimum distributions, or RMDs. Current rules say anyone who reaches age 74 after 2032 must begin RMDs at 75. If you were born in 1963, that applies to you. That gives you time to shift money into a Roth IRA on your own timetable, pay taxes at rates you can plan for, and create an income stream the IRS cannot tax later.

Eight Annual $120,000 Conversions Keep Taxes More Manageable

A Roth conversion moves money from a pretax IRA into a Roth IRA. The tradeoff is that you owe ordinary income tax in the year you convert. In this example, the $960,000 balance is divided into eight annual conversions of $120,000 each, with no other income assumed and the account balance held steady.

For a single filer, the 2026 standard deduction of $16,100 leaves $103,900 of taxable income. That stays within the 22% bracket, which ends at $105,700. The annual tax bill is about $17,570, or $140,560 over the full eight years.

For a married couple, the $32,200 standard deduction leaves $87,800 of taxable income. That keeps the full conversion inside the 12% bracket. The tax works out to about $10,040 per year, or $80,320 in total.

Medicare and Health-Insurance Costs Can Be Affected Too

Another issue is IRMAA, the Medicare income-related surcharge. Once income rises above a certain level, Part B and Part D premiums increase. Medicare uses income from two years earlier, so a conversion at 63 can affect what you pay at 65. In 2026, the first surcharge begins above $109,000 for singles and $218,000 for couples. A single filer converting $120,000 would cross that threshold, pushing Part B from about $203 to $284 a month. The couple remains comfortably below it.

The years before 65 can also be costly in a different way. The enhanced marketplace subsidies ended at the end of 2025. Under current rules, the premium tax credit disappears once household income goes above 400% of the federal poverty line, and Roth conversion income counts toward that total.

Pay the Tax From Outside the IRA

The smartest way to handle the conversion tax is with cash or money from a taxable brokerage account. If you take money out of the IRA to pay the tax, that amount no longer compounds tax-free inside the Roth. Once you are over 59½ and the Roth has been open for five tax years, withdrawals from the Roth are completely tax-free.

For this portfolio, the Roth is the better fit. In a taxable account, REIT dividends are only partly treated as qualified income, while much of what BDCs distribute comes from loan interest and is taxed as ordinary income. Inside a Roth, those payments are not taxed at all.

A 6.9% Yield Can Produce More Than $4,700 a Month

The portfolio’s blended yield is about 6.9%. On the full $960,000, that works out to roughly $5,481 a month in tax-free income. You would need about $823,000 to reach $4,700 a month. That picture changes if a single filer pays the conversion tax from IRA funds. In that case, income drops to about $4,678, just under the target. A couple paying from inside the IRA would still be around $5,022.

Amplify’s Partial Covered-Call Strategy Still Allows Some Upside

Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO) holds blue-chip dividend stocks and writes covered calls only part of the time. Weight: 20%. Yield: about 4.8%, or roughly $764 a month. Because it does not sell calls on every holding all the time, it leaves more room for price appreciation than a fully covered-call fund.

Goldman Sachs Uses the S&P 500 for Monthly Income

Goldman Sachs S&P 500 Premium Income ETF (NASDAQ:GPIX) owns the S&P 500 and sells call options on it to generate monthly income. At a 20% weight, its yield of about 8.4% produces roughly $1,344 a month. Covered-call funds often advertise tax benefits, but those advantages do not matter inside a Roth account.

W. P. Carey Is Rebuilding Its Dividend

W. P. Carey (NYSE:WPC) owns properties under long net leases, meaning tenants cover taxes, insurance, and maintenance. Weight: 15%. Yield: about 5.8%, or roughly $698 a month. After spinning off its office properties, the company reduced its quarterly dividend to $0.86 from about $1.07. Since then, it has raised the payout every quarter, and the latest payment is $0.95.

Sixth Street Lends to Middle-Market Businesses

A business development company, Sixth Street Specialty Lending (NYSE:TSLX), makes loans to middle-market private companies. With a 15% allocation, it yields about 9.4% on the $0.42 base dividend, or roughly $1,133 a month, plus an additional $0.01. Lower interest rates reduced the base dividend from $0.46. Nonaccrual loans make up just 2% of the portfolio at cost.

FT Vest Uses Options to Support Its Dividend Aristocrats Payout

FT Vest S&P 500 Dividend Aristocrats Target Income ETF (CBOE:KNG) holds the Dividend Aristocrats in equal weights and sells call options to reach its income target. Weight: 15%. Yield: about 8.0%, or roughly $955 a month. Most of the distribution comes from the fund’s option income.

Janus Henderson’s AAA CLO Fund Moves With Short-Term Rates

The Janus Henderson AAA CLO ETF (NYSEARCA:JAAA) invests in the highest-rated tranches of collateralized loan obligations, which are large pools of corporate loans. At a 15% weight, it yields about 4.9%, or roughly $587 a month. Its payout moves with short-term interest rates, so income declines when the Fed cuts rates.

Make the First Conversion by Year-End

Over eight years, the total conversion tax comes to about $140,560 for a single filer or $80,320 for a married couple. If that tax is paid from outside the IRA, the portfolio can generate roughly $5,481 a month. The immediate decision is how large the first conversion should be. A couple can convert the full amount and stay in the 12% bracket. A single filer must weigh whether avoiding the Medicare surcharge is worth converting less.