A Roth conversion after retirement is one of the more common questions that comes up in the first few years of retirement, usually right around the time a retiree notices their income has dropped but Social Security and Required Minimum Distributions haven’t started yet. That gap is exactly why the question is worth asking. It’s also why the answer isn’t the same for everyone.
A retiree came to me not long ago who had just stopped working and was sitting on a substantial traditional IRA built up over three decades. Her instinct was that converting some of it to a Roth now, while her income was temporarily low, made sense. That instinct was right, but the amount she should convert, and how many years she should spread it over, depended on details her instinct alone couldn’t account for.
Why the Retirement Gap Years Matter for a Roth Conversion
Once you stop working, taxable income often drops. If you haven’t started Social Security and you’re not yet subject to RMDs, you may have several years where your income sits well below your peak working-years bracket. That window, often called the gap years, is when a Roth conversion after retirement tends to do the most good.
A few reasons the timing matters:
- Lower current bracket. Converting while you’re in the 12% or 22% bracket, instead of waiting until RMDs push you into the 24% or 32% bracket, can meaningfully reduce your lifetime tax bill.
- RMDs shrink the traditional balance. Every dollar converted now is a dollar that won’t generate a mandatory distribution later. This connects directly to retirement withdrawal strategy more broadly, since a smaller traditional balance changes how much income you’re forced to take each year.
- Social Security taxation. Converting before you claim Social Security can help manage how much of your benefit ends up taxable, since provisional income calculations include IRA withdrawals.
- Legacy planning. A Roth IRA passed to heirs isn’t subject to income tax on withdrawals, and most non-spouse beneficiaries now have to empty inherited retirement accounts within 10 years. Converting some of the traditional balance now can hand heirs a tax-free asset instead of a taxable one, which fits naturally into a broader estate planning strategy.
When a Roth Conversion After Retirement Makes Sense
A conversion tends to work well when you’re retired but haven’t started Social Security or RMDs yet, when you expect a higher tax bracket later from RMDs or a spouse’s Social Security starting, when you have funds outside the IRA to cover the conversion tax, and when you’re comfortable spreading conversions across several years rather than doing one large one.
When It Might Not Make Sense
A conversion is worth reconsidering if you’d need to pay the tax out of the IRA itself, which cuts into the amount that actually lands in the Roth. It’s also worth pausing if you’re close to a Medicare IRMAA threshold, since a large conversion can raise Medicare Part B and Part D premiums two years later, or if you expect your tax bracket to stay flat or drop further in retirement, which reduces the benefit of converting at all. And each conversion carries its own five-year clock before earnings can come out tax-free and penalty-free, so timing matters if you might need the funds sooner.
How Much to Convert
Most retirees benefit from converting in smaller amounts over several years rather than converting a large balance at once. A common approach is to convert just enough each year to fill up the current tax bracket without spilling into the next one, while watching how the conversion affects Medicare premiums, the taxability of Social Security, and any other income for that year. This works best when it’s coordinated with the rest of the plan, including withdrawal sequencing, rather than treated as a decision made in isolation.
Putting It Together
A Roth conversion after retirement can lower a lifetime tax bill, reduce future RMDs, and leave a more tax-efficient inheritance, but only when it’s sized correctly for your bracket, your Medicare situation, and the rest of your income plan. Running the numbers each year, rather than making one large decision, is usually what separates a conversion strategy that helps from one that backfires.
At Inclinevest, Roth conversion decisions are made as part of the broader retirement income plan, not as a standalone tax move. Gabriel Motta, CFP®, is a retirement financial advisor in Greenwood Village, Colorado, working with pre-retirees and retirees in the five to fifteen years before and after retirement. If you’re weighing whether a conversion makes sense for your situation, we’d be glad to start that conversation. You can also review our services and fees.
Key Takeaways
- The years after retirement but before Social Security and RMDs begin are often the lowest-income years of retirement, making them a natural window for Roth conversions.
- Converting reduces future RMDs, which can also help manage how much of Social Security ends up taxable.
- Paying the conversion tax from funds outside the IRA preserves more of the converted amount for tax-free growth.
- A large conversion in a single year can push you into a higher bracket or raise Medicare IRMAA premiums two years later, so spreading conversions across several years is usually the better approach.
- Each conversion has its own five-year clock before earnings can be withdrawn tax-free and penalty-free.
- The right amount to convert changes year to year based on income, tax law, and account balances, which is why this works best as an ongoing part of the retirement income plan rather than a one-time decision.
About the Author
Gabriel Motta, CFP®, MBA, is the founder and principal of Inclinevest LLC, a fee-only fiduciary retirement financial advisor and financial planner based in Greenwood Village, Colorado. He works with high-net-worth pre-retirees and retirees throughout south Denver, across Colorado, and nationally, including clients in Highlands Ranch, Centennial, Lone Tree, Aurora, Parker, Castle Rock, and Littleton. As a retirement planner and wealth manager, Gabriel helps clients navigate retirement income planning, Social Security strategy, tax-efficient withdrawals, and equity compensation. Gabriel is a NAPFA and XY Planning Network member. Learn more at inclinevest.com or schedule a conversation.
Sources
- Internal Revenue Service, “Roth IRAs” — https://www.irs.gov/retirement-plans/roth-iras
- Internal Revenue Service, “Retirement Topics – Required Minimum Distributions (RMDs)” — https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
- Medicare.gov, “Costs” (IRMAA) — https://www.medicare.gov/basics/costs/medicare-costs
- Social Security Administration, “Benefits Planner: Income Taxes and Your Social Security Benefits” — https://www.ssa.gov/benefits/retirement/planner/taxes.html
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Registration doesn’t imply any level of skill or training. Please consult a qualified professional before making decisions about your own financial circumstances.
