Roth Conversions: The Gap Years Are When the Math Works
A Roth conversion pays off when you do it in a low-income year — usually the gap between retiring and the start of Social Security and required minimum distributions. You fill a cheap bracket on purpose now so a wall of taxable RMDs can't fill an expensive one later.
- The answer: in years before Social Security and RMDs start, convert just enough traditional IRA money to reach the top of a target bracket (say the top of the 24% band, ~$394,600 of taxable income MFJ in 2025). You pay a known rate now instead of a higher one on bigger RMDs at 73.
- The trap: a conversion adds to your MAGI, which can trigger IRMAA Medicare surcharges two years later and make more of your Social Security taxable. The cheapest-bracket math ignores both.
- The recommendation: convert in the gap years, stop short of the next IRMAA tier, and pay the conversion tax from a taxable account — never from the IRA itself.
Where the AI summary above gets this wrong
"Do a Roth conversion when you expect your tax rate to be higher in the future. You pay tax now at the lower rate and your money grows tax-free."
That's the right instinct, but it skips the parts that decide whether the move helps or hurts:
- IRMAA and Social Security cliffs — a conversion raises your MAGI, which can add Medicare Part B and D surcharges two years later and make up to 85% of your Social Security taxable. A conversion sized only to a tax bracket can blow past both.
- The 5-year clock, per conversion — each conversion starts its own five-year timer for penalty-free access to those dollars before age 59½. "Convert and withdraw" isn't free if you're early-retired.
- Paying the tax from the IRA wrecks the math — if you fund the conversion tax out of the IRA itself, you shrink the balance that was supposed to grow tax-free, and may owe a penalty on the part withheld before 59½.
My father, Walt Reeves, is 78 and lives outside Cleveland. He asked me last fall whether he should "do a Roth thing" with his IRA — and the honest answer was no. At 78 he's years past his required minimum distributions, which started at 73, and converting now just stacks ordinary income on top of money he's already forced to withdraw. The window he's asking about closed for him a while ago. But it's wide open for me. I'm 51 in Austin, planning to step back from full-time work around 60, and the years between then and my first RMD at 73 are exactly where this strategy lives. Here's the analysis I'm running on myself.
01 What a Roth conversion actually is
A Roth conversion moves money from a traditional IRA or 401(k) into a Roth, and the converted amount is taxed as ordinary income in the year you convert. There's no income limit on converting — unlike contributing to a Roth — so anyone with a pre-tax balance can do it at any age.
What you buy is the removal of every future tax on that money: no tax on growth, no tax on withdrawal, and no required minimum distributions for the rest of your life. A traditional balance is a partnership with the IRS whose share is set by future rates you do not control; a Roth balance is entirely yours at a price you fixed today.
For 2025 the federal ordinary brackets run 10%, 12%, 22%, 24%, 32%, 35%, and 37%, and the standard deduction is $30,000 for married couples filing jointly and $15,000 for singles. A conversion stacks on top of your other ordinary income, so the rate you pay on the converted dollars is your marginal rate — the bracket the last dollar lands in. That single fact is why timing the conversion into a low-income year is the whole game.
There is no annual cap either. You can convert $10,000 or $400,000, and the only real constraint is the tax bill you are willing to accept that year.
Conversions cannot be undone. Recharacterisation of a conversion was eliminated, so the decision is final once made and cannot be reversed if markets fall afterwards or the tax turns out higher than expected. That single change is why conversions are now sized carefully during the year rather than corrected the following April.
A five-year rule applies separately to each conversion: converted amounts must generally season for five years before the converted principal can be withdrawn penalty-free if you are under 59½. It rarely binds for someone in their sixties and matters a great deal for an early retiree.
Source: IRS — Roth IRAs
02 The gap-year opportunity
The best conversion years are the low-income ones between leaving work and the day Social Security and RMDs switch on. In that gap your taxable income can drop to almost nothing — no salary, Social Security not yet claimed, RMDs not yet required — which leaves the 10%, 12%, and 22% brackets sitting half-empty. Converting "fills" those cheap brackets with money that would otherwise come out later, when RMDs and Social Security have already pushed your baseline income up.
The clock is real. RMDs now begin at age 73 under SECURE 2.0, rising to 75 in 2033, and they're calculated on your year-end pre-tax balance, so a large IRA left untouched produces larger and larger forced withdrawals taxed at whatever bracket you're in by then. Every dollar you convert in a gap year at 12% or 22% is a dollar that won't be forced out at 24% or 32% later — and Roth dollars carry no RMD at all for the original owner.
03 Worked example: your bracket headroom
The core sizing question is simple: how much room is left in your target bracket this year? Take the top of the bracket you're willing to fill and subtract your current taxable income — what's left is your conversion headroom. In my own plan I model a gap year with about $40,000 of taxable income and a target of the top of the 24% bracket (~$394,600 MFJ in 2025), which leaves a lot of room. Change the numbers below to see your own headroom.
Shows: how much traditional IRA money you can convert this year while staying inside a bracket you choose, using the top of a 2025 bracket as the ceiling. Ignores: IRMAA surcharges, Social Security taxation, state tax, future law, your spouse's income, and the per-conversion 5-year rule.
Run my gap-year numbers — $40,000 of income against the $394,600 top of the 24% bracket — and the headroom is about $354,600 in a single year. That's far more than I'd actually convert, because the 24% bracket sits well above the IRMAA and Social Security cliffs I cover next. The headroom number is the ceiling; the real conversion is whatever stays under that and under those cliffs.
On the defaults above, the worked example returns $40,000. You can convert about $354,600 this year and stay inside this bracket.
04 The IRMAA and Social Security trap
A conversion's hidden cost is what it does to your modified adjusted gross income, not just your bracket. IRMAA — the income-related surcharge on Medicare Part B and Part D — is set off your MAGI from two years earlier, so a conversion at 63 can raise your Medicare premiums at 65. The surcharge is a cliff, not a ramp: cross a threshold by a single dollar and the whole tier of surcharge applies. A conversion sized to the 24% bracket can sail right past several IRMAA tiers.
The second cliff is Social Security taxation. Once you've claimed, your other income — including a conversion — feeds the formula that decides how much of your benefit is taxable, up to 85% of it. A conversion in a year you're collecting Social Security can therefore be taxed twice over: directly as ordinary income, and indirectly by dragging more of your benefit into the taxable column. Both cliffs are why the gap years — after work, before Social Security — are the cleanest place to convert.
Size conversions to a MAGI threshold, not just a tax bracket. Check the IRMAA tiers for the conversion year and stop short of the next one, and prefer years before you claim Social Security so the conversion doesn't also tax your benefit. The two-year IRMAA lookback means a conversion's premium hit lands later than the tax bill.
Source: IRS Publication 590-B
05 The 5-year rule and paying the tax
Two execution details decide whether a sound conversion plan actually works. First, every conversion starts its own five-year clock: if you're under 59½ and withdraw the converted dollars before that conversion's five years are up, a 10% penalty can apply to the amount that was taxable when you converted. After 59½ the penalty disappears, which is another reason the early-60s gap years are convenient — you're already past the penalty age but not yet forced into RMDs.
Second, pay the conversion tax from a taxable account, never from the IRA. If you withhold the tax out of the converted amount, you've shrunk the balance that was supposed to grow tax-free — and if you're under 59½, the withheld piece counts as an early distribution that can trigger its own 10% penalty. The whole advantage of converting is moving the full pre-tax balance into the Roth; funding the tax from outside cash is what preserves that.
06 Convert now vs later vs never
The decision comes down to three paths, and the right one turns on where your future tax rate sits relative to today's. Converting now in a gap year locks in a known low rate; waiting bets your rate stays low; never converting bets your future rate is lower than today's — or that the IRA goes to charity or low-bracket heirs.
| Path | Tax rate paid | Future RMD impact | IRMAA risk | Effect on heirs |
|---|---|---|---|---|
| Convert now (low-bracket gap year) | Known low rate (10–24%) | Shrinks pre-tax balance, so smaller RMDs at 73 | Manageable if sized below the next tier | Heirs inherit tax-free Roth; no 10-year tax drag |
| Convert later | Likely higher — bracket rises with RMDs + Social Security | Little relief; RMDs already large | Higher; conversions stack on top of RMD income | Smaller Roth, more pre-tax left to heirs |
| Never convert | $0 now; full RMDs taxed at future rate | Largest forced RMDs, taxed for life | Driven by RMDs alone | Heirs drain a pre-tax IRA within 10 years, taxed in their brackets |
For most early retirees with a large pre-tax balance, converting in the gap years wins, because it is the only path that uses cheap brackets which would otherwise be wasted. Between stopping work and starting Social Security and RMDs, many people have several years in the 12% or 22% bracket that will never come back. Never converting wins only when your future rate is genuinely lower, or the money is earmarked for charity.
Three costs to price before converting. IRMAA, where the conversion raises Medicare premiums two years later and does so as a cliff. The taxation of Social Security benefits, where additional income can push more of the benefit into taxable territory and create effective rates well above the nominal bracket. And paying the tax itself — which should come from outside the IRA, because using IRA money to pay the tax reduces the amount converted and can trigger a penalty before 59½.
Converting to the top of a chosen bracket and stopping is the method that works, rather than converting a round number and discovering afterwards which bracket it landed in.
For my own plan I'm not chasing the top of the 24% bracket the calculator allows — I'm bracket-filling the 12% and 22% bands in the gap years between stepping back at 60 and my first RMD at 73, and stopping short of the first IRMAA tier so I don't hand back the savings in Medicare surcharges two years later. The detail people miss is the IRMAA two-year lookback: a conversion at 63 shows up on my premiums at 65, so I plan it backwards from there. And I pay every dollar of the conversion tax from my taxable brokerage, never from the IRA — funding it out of the IRA quietly undoes the whole point.
FAQ
When should I do a Roth conversion?
In low-income years — most often the gap between retiring and the start of Social Security and required minimum distributions. You convert just enough to fill up a low bracket (the top of the 12% or 24% band) at a tax rate you know now, instead of letting larger RMDs push you into a higher bracket at 73.
At what age do required minimum distributions start?
Age 73 under SECURE 2.0, rising to 75 in 2033. Roth IRAs have no required minimum distributions for the original owner, which is the main reason converting before 73 can shrink a lifetime tax bill.
How is a Roth conversion taxed?
The converted pre-tax amount is added to your ordinary income for the year of the conversion and taxed at your marginal rates. There is no income limit on converting. Pay the tax from outside funds, not from the IRA, so the full balance keeps growing tax-free.
Can a Roth conversion raise my Medicare premiums?
Yes. A conversion increases your modified adjusted gross income, which can trigger IRMAA surcharges on Medicare Part B and D two years later, and can make more of your Social Security taxable. These cliffs are why you size a conversion to a bracket and a MAGI threshold, not just a bracket.
What is the 5-year rule on conversions?
Each Roth conversion starts its own 5-year clock. If you are under 59½ and withdraw converted dollars before that conversion's five years are up, a 10% penalty can apply to the amount that was taxable when converted. After age 59½ this penalty no longer applies.
Should I ever skip Roth conversions entirely?
Yes, in some cases. If you expect a much lower tax rate in retirement than today, plan to give the IRA to charity, or leave it to heirs in low brackets, converting can cost more than it saves. Converting is a bet that your future rate is at least as high as the rate you pay now.
Sources
Regulator references
- IRS Topic No. 413 — Rollovers from Retirement Plans · Internal Revenue Service · 2025 · how rollovers and conversions are treatedTax Topic 413: rollovers from retirement plans, including the 60-day rule and withholding.Last verified: 2026-06-21
- IRS Publication 590-B — Distributions from IRAs · Internal Revenue Service · 2024 · conversions, the 5-year rule, and RMDsPublication 590-B: distributions from IRAs, including required minimum distributions and the ordering rules.Last verified: 2026-06-21
- IRS — Roth IRAs · Internal Revenue Service · 2025 · Roth conversion mechanics and tax treatmentRoth IRA rules: contribution eligibility, the five-year clock and qualified distributions.Last verified: 2026-06-21
- IRS — Required minimum distributions FAQs · Internal Revenue Service · 2025 · RMD start age and Roth exemptionThe IRS FAQs on required minimum distributions, including the QLAC rules.Last verified: 2026-06-21
Research
- Beshears, J., Choi, J. J., Laibson, D. & Madrian, B. C. (2013), "Who Uses the Roth 401(k), and How Do They Use It?" · NBER Working Paper 19193 (2013)who actually takes up a Roth option when one is added, and how little the choice moves for employees already enrolledLast verified: 2026-09-07
- Brown, D. C., Cederburg, S. & O'Doherty, M. S. (2017), "Tax uncertainty and retirement savings diversification" · Journal of Financial Economics 126(3): 689-712the case for holding both account types when your future tax rate is unknown, rather than betting the whole balance on oneLast verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-06-21 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.