Roth Conversions During Low-Earning Years: A Retiree’s Tax Planning Opportunity Before RMDs Start

There is often a short stretch between the final paycheck and the first required retirement withdrawal when tax bills can be unusually low. Many retirees, however, either overlook that period or create expensive complications when they try to take advantage of it.

For many people in retirement, wages end years before the IRS requires distributions from traditional IRAs. During that gap, taxable income can fall to some of the lowest levels in decades. Salary is gone, Social Security may not yet have started, and required withdrawals are still off in the future.

That creates an opening. By shifting money from a traditional IRA into a Roth IRA during those lower-income years, a retiree may pay tax at reduced rates. The conversion also lowers the traditional IRA balance that future required withdrawals are based on, and the chance to do this ends on a schedule that suits some households better than others.

How a Roth Conversion Changes Taxable Savings Into Tax-Free Money

A conversion moves money from a traditional IRA to a Roth IRA. IRS rules say the converted amount is usually included in income on the return for the year of the conversion. The portion representing basis, or after-tax contributions already made, is excluded. When done correctly, the conversion avoids the 10% additional tax on early distributions, and it is reported on Form 8606.

The benefit shows up later. A qualified Roth withdrawal is tax-free, including any growth. In general, that means the withdrawal is made on or after age 59½ and the account has met a five-year holding requirement. The IRS also says minimum distribution rules for traditional IRAs do not apply to Roth IRAs while the owner is alive.

Why Lower-Income Years Can Fill Cheaper Tax Brackets

A tax bracket is simply a portion of income taxed at a certain rate. Income fills the lowest bracket first, and only the amount above that level is taxed at the next rate.

For tax year 2025, the IRS says married couples filing jointly are taxed at 10% on taxable income up to $23,850, then 12% up to $96,950, and 22% up to $206,700. For single filers, the 12% bracket ends at $48,475 and the 22% bracket ends at $103,350.

Once employment income disappears, many of the lower brackets may sit unused. The idea is to convert just enough each year to fill a chosen bracket without moving into the next one, then repeat the process until the window closes. The standard deduction is applied first. For tax year 2026, the IRS sets it at $32,200 for married couples filing jointly and $16,100 for single taxpayers. The IRS also publishes separate 2026 bracket thresholds, which apply to conversions completed in that year.

Required Distributions at 73 End the Opportunity

A required minimum distribution, or RMD, is the amount the IRS forces you to take from a traditional IRA each year. Publication 590-B says that anyone who reaches age 72 after December 31, 2022, must start receiving RMDs by April 1 of the year after turning 73.

RMDs can create problems in two ways. They add taxable income each year whether or not the money is needed. And because they are calculated from the traditional IRA balance, every earlier conversion reduces the base on which future RMDs are figured. Once RMDs begin, IRS guidance says you cannot convert amounts that are required to be distributed for that year, including the year you turn 73. That makes the years from retirement until then the most favorable time to convert.

Possible Downsides That Can Make a Conversion Costly

Medicare Premium Surcharges

IRMAA, or the income-related monthly adjustment amount, adds to Medicare premiums for higher-income enrollees. CMS set the standard Part B premium for 2026 at $202.90 a month. Single filers with modified adjusted gross income above $109,000, and joint filers above $218,000, pay $284.10. They also owe a Part D adjustment of $14.50. Each level works like a cliff: exceed the threshold by even one dollar, and the higher premium applies in full. Medicare uses income from an earlier tax return, so a large conversion can increase premiums years later.

Conversion income can also affect whether Social Security benefits are taxed. Publication 554 says half your benefits are added to all other income and compared with a base amount of $25,000 for individual filers or $32,000 for joint filers. A second threshold is set at $34,000, or $44,000 for married couples filing jointly. If you convert after starting benefits, a larger share of each payment can become taxable, raising the true cost of each converted dollar.

Two Five-Year Clocks

A separate five-year period begins with each conversion. For a conversion made in February 2025, Publication 590-B says that period starts on January 1, 2025. If converted money is withdrawn before the five-year period ends, the 10% additional tax may apply, although reaching age 59½ is an exception. Another five-year rule, measured from the first Roth contribution, determines whether earnings can be withdrawn tax-free.

There Is No Reversal

Publication 590-A says conversions made in tax years beginning after December 31, 2017, cannot be recharacterized, which means they cannot be switched back into a traditional IRA. If the market falls after the conversion, the tax still applies to the amount converted.

Who Benefits Most and Who Should Be Careful

This strategy is best suited to retirees with a large traditional IRA, several lower-income years before required distributions begin, and cash outside the IRA to pay the tax on the conversion. People near an IRMAA threshold, those already receiving Social Security, and anyone who expects to be in a lower tax rate later should be cautious. It is wise to review the numbers with a qualified professional before making a move.