If you’re in or nearing retirement, a Roth conversion might be the most powerful tool you’re not using — or not using correctly.
A Roth conversion done right can dramatically lower your lifetime tax bill, preserve your income flexibility, even protect your surviving spouse from costly tax burdens.
But done wrong, it can backfire — triggering higher Medicare premiums, unnecessary taxation on your Social Security benefits and a surprise tax spike later in life when it might be too late to adjust.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
That surprise often comes when required minimum distributions (RMDs) kick in — adding to your income whether you need it or not and potentially forcing you into higher tax brackets and Medicare surcharges.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
The newly passed One Big Beautiful Bill (OBBB) just raised the stakes.
The window is closing — and the bill is rising
While today’s lower marginal tax brackets were made “permanent,” history — and ballooning federal debt — suggests they’re unlikely to stay that way.
According to the Congressional Budget Office, the OBBB adds an estimated $1.7 trillion to the national debt in the next decade, further fueling what many experts believe is an inevitable shift toward higher taxes.
Historically, when the U.S. debt-to-GDP ratio exceeded 100%, marginal tax rates surged — at one point reaching as high as 94% during World War II.
We’re in what could be a temporary tax sale — and the clock is ticking.
The case of Bruce and Linda (vs Gary and Marie)
Let’s look at two couples who approached Roth conversions very differently.
Bruce and Linda took a proactive, tactical approach. With the help of a tax-savvy adviser, they converted just enough each year to stay below IRMAA thresholds and within a favorable tax bracket.
They used their tax return as a baseline, adjusted for changes each year and defined their “opportunity zone” — the income range that allowed them to convert efficiently without triggering additional taxes or penalties.
The result?
- $577,000 in total tax savings
- $607,000 more left to their children
Gary and Marie, on the other hand, did what most retirees do: nothing. They took the income they needed in early retirement and planned to wait until RMDs started at age 73. The problem? Their pretax retirement accounts continued to grow — faster than their required withdrawals.
When RMDs finally hit, Gary and Marie were forced to take more income than they needed, pay tax on those distributions and still watch their IRA balances grow.
The added income stacked on top of Social Security and investment earnings — triggering IRMAA Medicare surcharges, higher effective tax rates and the full taxation of their Social Security benefits.
Worse, when Gary passed away, Marie had to continue taking the same RMDs — but now paid taxes as a single filer. Her tax bill as a widow soared.
What most people miss about Roth conversions
The biggest myth? That Roth conversions are a one-time decision.
In reality, they’re a multiyear planning opportunity, best coordinated with your overall income, tax and Social Security strategy.
Without that context, many retirees follow the default withdrawal order: spend after-tax money first, then pretax, then tax-free. That sequence often leads to the retirement “tax torpedo” — a U-shaped curve in which taxes are low in early retirement, then spike later due to RMDs and widowhood.
The two primary triggers? Oversized pretax balances (and the RMDs that follow) and the loss of joint filing status after a spouse dies.
Why behavioral planning matters, too
Even the best strategy won’t help if it never gets implemented.
Many retirees delay action not out of laziness, but because the decision feels overwhelming — and the math is invisible. Without a written road map, most households simply wing it.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
As a Behavioral Financial Advisor®, I see this pattern all the time. Life gets busy. Careers, kids, grandkids, hobbies — and before you know it, a decade flies by.
Every year that passes without action is one step closer to RMDs, market volatility or widowhood — and one less opportunity to control your tax future.
That’s why I encourage every client to move from a tax preparation mindset (filing a return in April) to a proactive tax planning mindset (running projections every year). Once December 31 hits, your window for tax-efficient conversions slams shut.
Four steps to get started
You don’t need to overhaul your entire plan overnight. Start here:
- Run a baseline analysis using last year’s tax return
- Adjust for changes in income or life events (property sale, bonus, etc.)
- Define your “opportunity zone” — the income range you can fill with conversions while staying below IRMAA thresholds and tax bracket bumps
- Adjust annually as your income and portfolio change
Bonus tip: If the market dips, consider converting while account values are temporarily down. You’ll be able to shift more shares of your IRA into a Roth at a discounted tax rate.
For example, if your portfolio drops 20%, you’ll pay 20% less tax to convert the same number of shares.
The real cost of doing nothing
In one recent scenario we modeled, a couple who skipped proactive planning faced a projected $1.2 million in lifetime taxes. With a tactical Roth conversion strategy, that bill dropped to $643,000 — a $577,000 savings.
But the real shock came in the later years of retirement. When the husband passed away, the surviving spouse — now filing as a single taxpayer — saw her tax bill spike to $95,000 in a single year.
By contrast, in the Roth conversion scenario, that same year’s tax bill was just $4,500.
That’s the widow’s penalty — income drops, but tax rates go up due to the loss of joint filing status, smaller standard deductions and continued taxation on RMDs and Social Security.
You’ve worked too hard to let the IRS take more than its share
Your retirement shouldn’t be about fear — it should be about freedom. The right tax strategy can make the difference between a retirement full of choices … and one limited by taxes you didn’t plan for.
Want to make sure that you and the people you care about most keep and use as much of your money as possible — rather than paying more to Uncle Sam?
If your adviser isn’t modeling annual Roth conversion scenarios, coordinating with your broader income and Social Security plan and preparing for the potentially devastating impact of RMDs and widowhood, it might be time for a second opinion.
Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax adviser before making any decisions regarding your IRA.
