How thoughtful tax planning can transform your retirement income
Christopher Mallon
November 4th, 2025
When most people think about planning for retirement, they focus on saving for it. But once you stop working, a new challenge emerges: how to spend and withdraw your savings in the most tax-efficient way possible.
One of the most powerful tools available to retirees, especially those in their 60s, is the Roth conversion. For many, this strategy can mean tens or even hundreds of thousands in lifetime tax savings.
The years between retirement and your required minimum distribution (RMD) age offer a powerful window for tax planning. By strategically converting a portion of your traditional IRA to a Roth IRA during this period, you can lower lifetime taxes, create more flexibility in retirement income, and leave a greater legacy for your heirs.
Why Consider a Roth Conversion Before RMD Age?
Many retirees overlook one of the most valuable opportunities available before age 73—the chance to make Roth conversions while in a lower tax bracket. A Roth conversion before RMD age allows you to move money from tax-deferred accounts into tax-free growth, smoothing out your future taxable income and helping you avoid costly Medicare surcharges and Social Security tax traps. For those nearing 70 or recently retired, planning conversions strategically can make a significant difference in long-term wealth and retirement stability.
A Real-World Example: John and Mary’s Roth Conversion Strategy
Meet John and Mary, both age 66. They’ve recently retired and have $1 million in a traditional IRA. Because they’ve stopped working, they currently have no earned income, and they won’t start taking Social Security until age 70.
That means their taxable income is near zero presenting a valuable opportunity.
Under current tax law, Required Minimum Distributions (RMDs) from traditional IRAs begin at age 73. Once those start, withdrawals are fully taxable, often pushing retirees into higher brackets and triggering extra taxes on Social Security and Medicare surcharges (IRMAA).
Between now and age 73, John and Mary have a seven-year window to convert portions of their IRA to a Roth IRA while staying in relatively low tax brackets.
4 Reasons Roth Conversions Can Strengthen Your Retirement Plan
A Roth conversion moves money from a pre-tax IRA into a Roth IRA. You pay income tax on the amount converted today, but future growth and withdrawals are completely tax-free.
Here’s why this can be such a strategic move for early retirees:
- Use Low Tax Brackets Efficiently
With no other income, John and Mary could fill up the 12% or 22% federal tax bracket each year with Roth conversions, turning taxable dollars into tax-free dollars at a historically low rate. - Reduce Future RMDs
Every dollar converted to a Roth now means one less dollar subject to required withdrawals later. That helps control taxable income, potentially lowering Medicare premiums and taxes on Social Security. - Create Tax Flexibility in Retirement
With both pre-tax and Roth accounts available, they can later decide which bucket to pull from based on what’s most tax-efficient each year. - Enhance Estate Planning
Roth IRAs pass to heirs tax-free, giving children or other beneficiaries the flexibility to withdraw funds over 10 years without adding taxable income.
A Quick Example with Numbers
Assume John and Mary decide to convert $100,000 per year for the next five years.
- Their annual conversion keeps them in the 22% marginal tax bracket.
- They’ll owe roughly $14,000 in federal taxes each year, which they can pay from a separate cash account.
- By age 71, they’ll have moved $500,000 into a Roth IRA, tax-free for the rest of their lives.
If they left everything in the traditional IRA, future RMDs could easily push them into a higher tax bracket (and higher Medicare premiums). Over a 25-year retirement, this proactive strategy could save a lot in cumulative taxes.
How to Optimize Timing and Avoid Tax Surprises
The Key: Timing and Coordination
Roth conversions work best when coordinated with:
- Social Security timing (to avoid unnecessary taxation on benefits)
- Medicare thresholds (to stay below IRMAA surcharges)
- Your broader investment and withdrawal plan
Tax laws and brackets can change, but the opportunity for retirees to take control of their tax destiny remains. Strategic conversions during low-income years, especially the gap between retirement and RMD age can be one of the most rewarding planning moves available.
The Bottom Line: Make the Most of the Years Before RMDs Begin
The years right after retirement often offer a brief but powerful window for tax planning. By using that time wisely, you can smooth out lifetime taxes, gain flexibility, and leave more to heirs without taking more market risk.
As always, every situation is unique. A coordinated plan between your financial advisor and tax professional can help ensure conversions are sized and timed for your goals.
To explore whether a Roth conversion fits into your long-term strategy, schedule a free discovery call with one of PCM’s financial advisors.
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