Roth Conversions Before RMDs: Using the Gap Years

It is the stretch between the year your earned income stops and the year required minimum distributions begin, when your taxable income is often the lowest it has been in decades. Under SECURE 2.0, RMDs start at 73, or 75 if you were born in 1960 or later (IRS, 2026). Someone who retires at 65 and was born in 1960 has as many as ten tax years to work with.

The reason the window matters is arithmetic. A traditional IRA is a deferred tax bill whose size you do not control once RMDs begin. The IRS divides the prior year-end balance by a factor from its Uniform Lifetime Table, 24.6 at 75 and 12.2 at 90, so the required withdrawal rises from about 4% of the account to over 8% (IRS Publication 590-B). If the account keeps growing, the withdrawals keep growing, and they arrive on top of Social Security, pensions and investment income.

A Roth conversion lets you choose when to pay that bill. You move money from a traditional IRA to a Roth IRA, report the converted amount as ordinary income that year, and from then on the money grows and comes out tax-free, with no RMDs during your lifetime. You are trading a tax you control now for a tax you would not control later. The question is never whether to pay tax on the IRA; it is at what rate, and who pays it.

Two rules shape the window. First, once RMDs start, the year’s RMD must be taken before anything is converted, and the RMD itself cannot be converted, because RMDs are not eligible for rollover (IRS Publication 590-B). You can still convert in your RMD years, but the RMD fills the low brackets first. Second, conversions made after 2017 cannot be recharacterized, so there is no undo if markets fall the week after you convert.

A hypothetical couple, both 66 in 2026, both born in 1960, so their RMDs begin at 75, in 2035. David retired last year from an engineering firm; Carol taught for 30 years and draws a small pension. Their house is paid off and their two children are in their late 30s, both in the 32% bracket. They plan to delay Social Security to 70.

With only $40,000 of income and a 2026 standard deduction of $35,500 for a couple who are both 65 or older, plus the senior deduction of up to $6,000 each, they owe no federal income tax in 2026 unless they create some. They are living on the brokerage account and cash. That is the whole opportunity: every dollar of the 10%, 12% and 22% brackets is sitting empty.

Without conversions, the $2,100,000 grows at 5% to about $3.26 million by 75. Their first RMD would be about $132,000, stacked on $81,600 of taxable Social Security and their other income. That puts their income at about $254,000 at 75, above the first Medicare surcharge line, and still rising.

Convert up to the top of the bracket you expect to face later, then check the Medicare tier lines before you settle on a number. The 2026 brackets for married couples filing jointly are below (IRS, Revenue Procedure 2025-32). Single filers’ brackets are half as wide through the 32% bracket, which is why a surviving spouse so often ends up paying more tax on less income.

We ran four targets for David and Carol’s first year. Taxable income is what is left after their $35,500 standard deduction and the senior deduction, so the conversion needed to fill a bracket is larger than the bracket line itself. The tax shown is the extra federal tax caused by the conversion; the surcharge is the extra Medicare Part B and Part D premium the couple would pay in 2028, because of the two-year lookback explained below.

Three things stand out. First, even a large conversion is taxed at a modest average rate because it fills the empty low brackets first: converting $175,000 costs $28,000, an average of 16.0%. Second, the last-dollar rate in the 22% bracket is higher than 22%. From $150,000 of income, the senior deduction shrinks by 6 cents per dollar for each spouse, so each extra dollar converted adds 12 cents of taxable income on top of itself. That deduction runs through 2028, and the effect disappears once it is fully phased out, which is why the 24% row shows a clean 24%.

Third, the step from the IRMAA line to the top of the 22% bracket adds $32,200 of conversion for a $2,297 Medicare surcharge two years later. That is a fixed cost of roughly 7.1% on the extra slice, on top of the tax. For David and Carol, whose RMDs would otherwise be taxed at 22% to 24%, the IRMAA line is the natural stopping point. A couple with $4.20 million in traditional accounts would likely go further, to the top of the 24% bracket ($399,000 a year), and accept the surcharge as part of the price.

Our Tax Bracket Calculator shows where your own income lands and how much room is left in your bracket. Run it each November with your year-to-date income before you decide the year’s conversion.

They shrink them roughly in proportion to what you convert. We had David and Carol convert up to $3,000 below the IRMAA line every year from 66 to 74: $175,000 a year until Social Security starts at 70, then $93,400 a year, since the benefits take up part of the room. That moves $1.17 million into Roth IRAs over nine years, for $210,000 of federal tax, an average of 18.0%.

On raw dollars, the $210,000 paid in the gap years buys $339,000 of lower federal income tax and $70,000 of lower Medicare surcharges between 75 and 90. That comparison flatters the conversion, because money paid at 66 could have stayed invested. Discounting everything back to 66 at the same 5% return, the couple pays about $177,000 and saves about $180,000. For David and Carol themselves, while both are alive, it is close to a wash.

So why do it? Because the example flatters the no-conversion path in two important ways. It assumes both spouses live to 90 filing jointly. When one dies, the survivor keeps most of the income, including the larger Social Security check and the full RMD, but files as a single taxpayer, whose 22% bracket ends at $105,700 instead of $211,400. And it ignores what is left at 90: about $2.75 million of traditional IRA without conversions, versus $1.44 million of traditional IRA and $3.80 million of Roth with them. The next sections cover both. Our RMD Calculator projects your own RMDs by age.

Because paying from the IRA converts less for the same tax. Convert $100,000 and pay 22% from a brokerage account, and $100,000 lands in the Roth. Convert the same $100,000 with 22% withheld, and only $78,000 lands in the Roth while you still owe tax on the full $100,000. The money you would have used to pay the tax from outside was, in effect, a taxable account; moving that value into the Roth is the point of the exercise.

There is a second, smaller gain. Cash and bonds in a taxable account throw off interest taxed every year. Spending them on the conversion tax shrinks a taxed account and grows an untaxed one. And if you are under 59½, tax withheld from a conversion is treated as a distribution that can owe the 10% additional tax, so for early retirees paying from outside is close to mandatory.

A conversion creates a tax bill in the year you make it, so plan the payment. The IRS expects tax to be paid as income is received, through withholding or quarterly estimates. You avoid an underpayment penalty if your payments cover 100% of last year’s tax, or 110% if last year’s adjusted gross income was above $150,000 (IRS Publication 505, 2026). In the first gap year that prior-year figure may be a working-year tax bill, so the safe harbor can take more than you expect; in later gap years it is the last conversion year’s tax. A late-year conversion paired with a fourth-quarter estimated payment is the usual pattern.

Where the tax money comes from matters for the plan too. David and Carol pay it from their brokerage account and cash, which is why they started with $900,000 and $150,000 there. Selling appreciated shares to raise the cash adds capital gains to the year’s income and eats into the room you set aside for the conversion, so draw first from cash, high-basis lots and maturing bonds. Our guide to retirement withdrawal order covers how to sequence the accounts around a conversion plan.

There are two separate five-year clocks, and after 59½ only one of them can still affect you. Both are set out in IRS Publication 590-B.

In practice this means two things for readers near or in retirement. If you have never had a Roth IRA, open one now with a small conversion, even a few thousand dollars, so the account clock starts this January rather than the year of your first big conversion. And if you do take money out within the first five years, the ordering rules protect you: contributions come out first, then converted amounts, and earnings last, so a retiree over 59½ is taxed only if the withdrawal reaches earnings before the account is five years old.

Your heirs inherit your clock. A Roth IRA that has been open for five years when they withdraw pays out tax-free to them; one opened late may need to wait. That is one more reason to open the account early. Our Roth vs. traditional IRA guide covers the account rules in more depth, and the Roth IRA Calculator projects tax-free growth.

A conversion raises your modified adjusted gross income, and two programs price your health coverage from that number: Medicare, through the income-related monthly adjustment amount (IRMAA), and the ACA marketplace, through premium tax credits before 65.

Medicare looks back two years. Social Security sets each year’s IRMAA from the tax return two years earlier, or three if that one is not available (SSA POMS HI 01101.020). A conversion at 63 affects premiums at 65; one at 66 affects them at 68. The 2026 tiers for joint filers are below (CMS, 2025). The standard Part B premium is $202.90 a month per person.

The tiers are cliffs, not phase-ins: one dollar over a line costs the full step for both spouses. That is why we left a $3,000 cushion under the line in the example. Estimate your income conservatively, convert late in the year when dividends and capital gain distributions are known, and remember that IRMAA’s MAGI adds tax-exempt interest back to your adjusted gross income (SSA POMS HI 01101.010), so municipal bonds do not keep you under a line.

If you just retired, your IRMAA may be based on your last full salary year. Social Security will redetermine it after a qualifying life-changing event such as work stoppage, work reduction, the death of a spouse, divorce or the loss of a pension, using Form SSA-44 (SSA POMS HI 01120.001). A voluntary Roth conversion is not on that list. Our guide to Medicare enrollment and IRMAA covers the appeal process.

ACA subsidies can matter more before 65. If you retire before Medicare and buy marketplace coverage, the premium tax credit depends on your household income for the year. The enhanced credits that removed the income cap expired at the end of 2025, and for 2026 coverage households above 400% of the federal poverty line again receive no credit at all (KFF, 2026). A conversion that pushes a 62-year-old couple over that line can cost them the entire subsidy, which for two people in their early 60s is often worth more than the tax saved by converting. In the pre-Medicare years, the usual answer is to convert modestly, or not at all, and do the heavy converting from 65, keeping the two-year IRMAA lookback in mind from 63. The Healthcare Cost Estimator helps price those years.

Often more than they help you. Most adult children who inherit an IRA after 2019 must empty it within ten years of your death, and if you had already started RMDs they must also take annual distributions along the way (IRS Publication 590-B). Those withdrawals land in their peak earning years. A child in the 32% or 35% bracket who inherits $2.75 million of traditional IRA will pay far more on it than David and Carol would have paid converting at 22%.

An inherited Roth IRA follows the same ten-year deadline, but the regulations treat a Roth owner as having died before the required beginning date, so there are no annual withdrawals in years one through nine (Treasury final regulations, T.D. 10001). Heirs can leave the whole account to grow for ten years and take it out tax-free at the end, as long as your Roth has met its five-year clock.

Two more points favor converting when the heirs are in high brackets. A trust named as beneficiary pays the 37% rate on retained income above just $16,000 in 2026 (IRS, Rev. Proc. 2025-32), so a traditional IRA left to an accumulation trust is taxed heavily unless it pays out. And Roth dollars give heirs flexibility: they can time withdrawals around their own income without adding to it. Our guide to inherited IRAs and the 10-year rule covers the beneficiary rules in detail, and estate planning basics covers the documents that go with them.

Skip or shrink the conversion when the rate you would pay now is higher than the rate the money will face later. That happens more often than conversion enthusiasts admit.

• The IRA is modest. If RMDs, Social Security and pensions together will keep you in the 12% bracket, converting at 22% today loses money.
• You would have to pay the tax from the IRA. Without outside money, much of the benefit disappears, and before 59½ you add a penalty.
• The IRA is going to charity. A charity pays no tax on an inherited IRA, and from 70½ you can give directly from the IRA tax-free through qualified charitable distributions. Converting money you intend to give away pays a tax nobody needed to pay.
• You are about to move to a lower-tax state. Converting in a high-tax state the year before moving to one with no income tax adds state tax you could have avoided.
• You expect large deductible medical costs. Long-term care and other large medical bills can offset IRA withdrawals later; see our guide to long-term care planning.
• It would cost you ACA subsidies or push you over an IRMAA tier for little extra conversion. Size the conversion to the line, not past it.
• Your heirs are in low brackets and your own horizon is short. If your children will pay 12% on the inherited money, converting at 24% is not a gift to them.

Social Security timing interacts with all of this. Every year you delay benefits leaves more bracket room for conversions, which is one reason delaying to 70 and converting in the late 60s pair so well. Our guide on when to claim Social Security covers the claiming side.

With one instruction to your IRA custodian each year, timed after you know the year’s other income. The sequence below is the one we would follow.

A down market is a good time to convert, because the same number of shares moves over at a lower taxable value and the recovery happens inside the Roth. Just remember there is no recharacterization: if you convert in March and the market falls in April, you pay tax on the March value.