How Much of a $1.15 Million IRA Should a 66-Year-Old Convert to a Roth to Generate $5,900 a Month Tax-Free?

Turning an entire IRA into a Roth at once may look simple, but it can also trigger a much larger tax bill than needed. For a 66-year-old with a single annual deadline, the more efficient move may be more measured.

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If you are 66, enrolled in Medicare, and sitting on $1.15 million in tax-deferred retirement savings, the goal may be to create $5,900 a month, or $70,800 a year, that the IRS never taxes. A Roth conversion shifts pretax IRA money into a Roth IRA, allowing you to pay taxes now and avoid them later.

The timing still works in your favor. Someone born in 1960 would not face required minimum distributions until age 75, leaving nine tax years to convert money from 2026 through 2034.

Two Conversion Routes and Their Tax Costs

The comparison assumes a single filer who delays Social Security, has no other income, pays the tax from money outside the IRA, and faces 2026 tax rules each year. It also uses current yields and prices.

Route A: Convert the Full Amount in One Year

The standard deduction is $18,150, including the extra amount available to filers age 65 and older. The new $6,000 senior deduction is phased out by 6% of income above $75,000, so a conversion this large would eliminate it. More than 40% of the income would be taxed at the 37% bracket, which begins above $640,600. Federal tax would come to roughly $375,000, or about 33% of the account.

Medicare would also become more expensive. Income-related monthly adjustment amounts, or IRMAA surcharges, are based on income from two years earlier. Income of $500,000 or more would push a 2028 Part B premium to $690 a month under today's table, compared with the standard premium of $203.

Route B: Convert $109,000 a Year

For a single filer, $109,000 is the highest income level that avoids any Medicare surcharge. At that point, you would still keep $3,960 of the senior deduction and remain in the 22% bracket, which runs to $105,700 of taxable income. The annual tax bill would be about $13,800, or close to 13%.

Over nine years, that approach would move $981,000 into Roth accounts for roughly $124,000 in total tax. That is about $250,000 less than Route A, while leaving $169,000 in the traditional IRA.

If you already receive Social Security, conversion income also affects how much of your benefits are taxed. Once combined income passes $25,000 for a single filer, part of the benefit becomes taxable. Above $34,000, as much as 85% can be taxable. Route A produces the larger impact.

Roth withdrawals become tax-free after age 59½ and after five tax years have passed since the first Roth contribution or conversion.

Why $1.15 Million Falls Slightly Short

The portfolio discussed below produces about a 6.1% yield. At that rate, generating $70,800 a year would require about $1.17 million, which is more than the IRA balance itself. Route A would produce about $5,800 a month. Route B, once completed in 2034, would generate roughly $4,950 a month at current yields. Reaching the full target would require either a larger conversion or more time for growth.

NEOS S&P 500 High Income ETF Provides the Highest Yield

NEOS S&P 500 High Income ETF (CBOE:SPYI) holds S&P 500 stocks and sells index options to generate extra income. With a 15% allocation and an 11.9% yield, it provides about 30% of the total income. The expense ratio is 0.68%. The fund is designed to be tax-efficient, though that benefit is irrelevant inside a Roth. Selling options also limits upside during strong market rallies.

iShares Core Dividend Growth ETF Supplies the Growth Component

iShares Core Dividend Growth ETF (NYSEARCA:DGRO) owns U.S. companies that consistently raise dividends. Its 20% allocation yields only 1.8% and provides about 6% of the income. The fee is 0.08%. Over the past decade, the fund has acted as the growth engine, delivering a total return of about 244%.

Agree Realty Pays a Rising Monthly Dividend

Agree Realty (NYSE:ADC) is a net lease real estate investment trust, or REIT, meaning its tenants cover property taxes, insurance, and maintenance. With a 4.6% yield on a 15% allocation, it contributes around 12% of the income. Its monthly dividend recently increased to $0.271 from $0.253 two years earlier.

Blackstone Secured Lending Offers High Yield Despite Softer Loans

Blackstone Secured Lending (NYSE:BXSL | BXSL Price Prediction) is a business development company that lends to private businesses. It receives a 15% allocation, yields 10% on the newer lower dividend, and produces about 25% of the income. Its loan quality has weakened. Non-accruals, or loans no longer paying interest, rose to 2%, net asset value fell to $25 from $27, and the quarterly dividend dropped to $0.60 from $0.77 in 2027.

Enterprise Products Partners Adds Pipeline Income and a Tax Issue

Enterprise Products Partners (NYSE:EPD) is a pipeline master limited partnership. A 15% allocation at a 6.1% yield generates about 15% of the income. Its quarterly distribution increased to $0.56 from $0.545 a year earlier.

Keeping it inside a Roth creates a complication. Partnerships issue K-1 forms, and their business income can count as unrelated business taxable income inside an IRA. If the account has $1,000 or more of that gross income, the IRA may need to file Form 990-T and could owe tax on its own. Investors should ask their custodian how this is handled.

iShares 0-3 Month Treasury Bond ETF Acts as the Cash Reserve

The iShares 0-3 Month Treasury Bond ETF holds Treasury bills that mature within three months. A 20% allocation yielding about 3.9% contributes roughly 13% of the income. The fee is 0.09%. It serves as a cash buffer when markets decline. Treasury interest is usually exempt from state income tax, but that advantage is lost inside a Roth.

One Deadline Determines the 2026 Decision

The math favors Route B. It cuts taxes by about $250,000, avoids Medicare surcharges, and moves toward roughly $4,950 a month in tax-free income by 2034. Portfolio growth could help close the gap to $5,900, and the remaining IRA plus Social Security can cover the difference in the meantime. Before the year ends, the conversion amount for this year should be completed up to $109,000. After that, the opportunity to use the 2026 22% bracket is gone.