The Five Years That Change Your Roth Conversion Strategy

Most of what you’ll read about Roth conversions online boils down to the same advice: convert when your income is low, do it before RMDs start, take advantage of favorable tax brackets while you can. None of that is wrong. It’s just incomplete.

We recently ran Roth conversion analyses for a handful of clients approaching retirement. Two of them, in particular, stuck with us. Similar financial pictures on paper. Very different answers once we actually ran the numbers. And the reason had almost nothing to do with how much money either of them had.

It had to do with when.

What actually goes into this analysis

A lot of the Roth conversion content floating around treats the decision like basic arithmetic: move money from pre-tax to Roth, pay tax now, let it grow tax-free forever. Done.

In our experience, that’s rarely how it plays out once you look closely. A real analysis has to weigh several things at once, and they don’t always pull in the same direction.

There’s the breakeven tax rate, which tells you the point where converting now becomes better or worse than waiting and paying tax on distributions down the road. That breakeven shifts depending on your time horizon, how you expect your investments to grow, and where the money to pay the conversion tax is actually coming from.

There’s Medicare. Once you’re enrolled, your Part B and Part D premiums are based on income from two years earlier, and a sizable conversion can bump you into a higher IRMAA bracket without you realizing it until the premium notice shows up.

There’s Social Security. Depending on your combined income, up to 85% of your benefit can be taxable, and a conversion at the wrong time can push more of that benefit into the taxable column. It’s a second-order effect people rarely think to check for.

And there’s the simple question of how you’re drawing down everything else while you convert. Brokerage accounts, cash, other income sources. All of it feeds into the same tax picture in the same year.

Put those four things together and you start to see why “convert when you’re in a low bracket” is only half the story.

Two clients, same age bracket, different math

Take Mr. and Mrs. Smith, both 65. They came to us looking fairly standard for a couple near full retirement: solid 401(k) balances, the house paid off, planning to claim Social Security within the next year or so. On paper, strong candidates for a multi-year conversion strategy.

Once we modeled it out, the picture got tighter than expected. At 65, they were close enough to RMD age that there wasn’t much room left to spread conversions across several lower-income years. They were already on Medicare, so every dollar converted had an immediate effect on their premium bracket. And because they were about to claim Social Security, conversions were pushing more of that future benefit into taxable territory. There wasn’t a lot of slack in the system.

That didn’t rule out converting for the Smiths. It meant the plan had to be more careful — smaller amounts, timed around their Medicare enrollment and Social Security start date, coordinated with exactly what else they were drawing down that year. Precision mattered a lot more than ambition here.

Now take another client, Mr. Johnson, age 60. He actually had less saved than the Smiths, and his income needs in retirement looked minimal. If anything, he seemed like a lower priority for this kind of planning.

But when we ran his numbers, there was a real chance he’d never need to touch his pre-tax retirement funds at all. Left alone, those funds would eventually trigger RMDs regardless of whether he needed the income, stacking on top of whatever else he had coming in. For him, converting earlier while he was still in a lower bracket and years from Medicare gave him room to spread the conversions out, avoid IRMAA entirely for now, and set up a much more tax-efficient outcome for whatever he eventually leaves behind.

Same general strategy. Five years apart in age. Completely different amount of room to work with.

Why five years makes this much of a difference

By the time you’re 65, a few things tend to be converging at once. RMDs aren’t far off, so there’s less time to spread conversions across multiple years. Medicare is active, so IRMAA thresholds apply immediately. Social Security claiming is often close, which means conversions can affect how much of that benefit gets taxed. Each dollar converted lands with more force.

At 60, most of that hasn’t kicked in yet. There’s usually more runway before RMDs, Medicare, and Social Security all show up in the same tax return. Conversions can be spaced out to stay in a lower bracket, and if circumstances change, there’s still time to adjust course.

At 60, you have flexibility. At 65, you need precision.

What this actually means for you

The lesson from the Smiths and Mr. Johnson isn’t “convert early” or “wait.” It’s that the decision was never really yes or no in the first place. It’s a question of timing, amount, and reason, and those depend entirely on your own income needs and how close you are to Medicare and Social Security.

A five-year gap in age, or a change in how much income you’ll actually need down the road, can shift the entire strategy. Two people with similar balances can end up in very different places once timing enters the picture.

If you’re somewhere in the 5-to-10-year window before retirement, this is worth modeling now rather than later. The flexibility that makes Roth conversions worth considering tends to narrow as retirement gets closer, and for a lot of people, the best window to act is earlier than they’d guess.

If you haven’t run this kind of analysis on your own situation, it’s worth doing before that window closes.