Retired but Not on RMDs Yet? A $128,000 Roth Conversion Could Cost You Just 9% in Tax This Year
Last updated 10/09/2026 by
SuperMoney Team
Edited by
Andrew Latham
Summary:
If you’ve retired but haven’t started Social Security or required minimum distributions yet, you may be in the lowest tax bracket you’ll see for the rest of your life. Converting some traditional IRA money to a Roth during those years can mean paying 12% tax now instead of 22% or more later. For couples 65 and older, the new $6,000-per-person senior deduction makes 2026 through 2028 an especially good window, and 2026 conversions have to be done by December 31.
Here’s a situation I see a lot. A couple retires in their early to mid 60s with most of their savings in 401(k)s and traditional IRAs. They plan to live on cash and a taxable brokerage account for a few years, delay Social Security to 70, and let the retirement accounts keep growing.
Their tax return suddenly looks tiny. That feels great. But it can be a missed opportunity.
Jeremy Keil, a CFP writing for Kiplinger, calls this stretch the “golden tax planning window.” I like the phrase, because it captures the key point: it opens, and then it closes. Let’s put real numbers on what it’s worth and how to use it without tripping over the traps.
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What a Roth conversion actually is
A Roth conversion means moving money from a traditional IRA (or an old 401(k) rolled into one) into a Roth IRA. You pay ordinary income tax on the amount you convert this year. After that, the money grows tax-free, and qualified withdrawals are tax-free too.
A few things surprise people:
- You don’t need earned income to convert. Contribution limits don’t apply either.
- You can convert any amount you want. A little, a lot, or none.
- Roth IRAs have no required minimum distributions during the original owner’s lifetime.
- Once you convert, you can’t undo it. That option went away in 2018.
So the question isn’t “should I convert?” It’s “how much should I convert this year, at what tax rate?”
Why the early retirement years are the sweet spot
While you were working, your salary filled up the lower tax brackets. Every extra dollar was taxed at your top rate.
In retirement, before Social Security and RMDs start, that salary is gone. Your 10% and 12% brackets are mostly empty. You can fill them with conversions at a low rate.
Later, the picture flips. For anyone born in 1960 or later, RMDs start at 75. Those forced withdrawals get added on top of Social Security, and up to 85% of your benefits can become taxable. Many retirees who were in the 12% bracket at 66 are in the 22% bracket at 75, whether they need the money or not.
A real-number example
Meet a married couple, both 66, retired in 2026. They have $1.4 million in traditional IRAs, about $20,000 a year of interest and dividends from a taxable account, and they’re waiting until 70 to claim Social Security.
Their 2026 deductions look like this:
| Deduction | Amount |
|---|---|
| Standard deduction, married filing jointly | $32,200 |
| Extra standard deduction for 65 or older ($1,650 each) | $3,300 |
| Senior bonus deduction ($6,000 each, phases out above $150,000 MAGI) | $12,000 |
| Total | $47,500 |
Without a conversion, their $20,000 of income is fully wiped out by deductions. They owe $0 in federal income tax.
Now, say they convert $128,300. Their total income becomes $148,300, just under the $150,000 level where the senior deduction starts shrinking. After $47,500 of deductions, taxable income is $100,800, which is exactly the top of the 12% bracket for joint filers in 2026.
Federal tax on that: about $11,600. That’s an effective rate of roughly 9% on the money they moved into a Roth.
What happens if they don’t convert? Assume their IRAs grow 5% a year. By 75, the $1.4 million is about $2.17 million. Their first RMD would be around $88,000. Add $62,000 of combined Social Security (with 85% of it taxable) and the same $20,000 of investment income, and their taxable income lands around $125,000, solidly in the 22% bracket. The senior bonus deduction will have expired after 2028, too.
So every dollar they convert now at 12% is a dollar that likely would have been taxed at 22% or more later. On $128,300, that 10-point difference is about $12,800 in tax, from a single year’s conversion. Do something similar for three years while the senior deduction lasts, and the lifetime savings can reach well into five figures.
These are assumptions, not promises. Tax law can change, and so can your spending and investment returns. But the direction is clear for a lot of retirees with large pretax balances.
The traps to watch out for
Medicare premium surcharges (IRMAA)
Medicare Part B and Part D premiums go up when your income passes certain levels. The catch is a two-year lookback: your 2026 income sets your 2028 premiums. For 2026 premiums, the first surcharge tier kicks in above $218,000 of modified adjusted gross income for joint filers ($109,000 single), and those lines rise with inflation each year. In our example, $148,300 is comfortably under that. But if you’re thinking of converting $250,000 in one year, check this first.
Health insurance subsidies before 65
If you retired before 65 and buy coverage through the ACA marketplace, your subsidy depends on your income. A large conversion can cost you thousands in lost premium help. For early retirees, smaller conversions or waiting until Medicare kicks in often makes more sense.
Paying the tax from the IRA itself
Pay the conversion tax with cash from a savings or brokerage account if you can. If you withhold it from the conversion, less money lands in the Roth, and if you’re under 59½, the withheld amount may be hit with a 10% early withdrawal penalty.
The five-year clock
Each conversion has its own five-year waiting period before you can withdraw the converted amount penalty-free if you’re under 59½. And to take earnings out tax-free, your first Roth IRA needs to be at least five years old and you need to be 59½. For most retirees in their late 60s this is a small issue, but know it exists.
Converting after Social Security starts
Once benefits start, each extra dollar of income can make more of your Social Security taxable. That can push your effective marginal rate well above your bracket. It’s one more reason the years before claiming are usually the best time to convert.
How to decide how much to convert
- Estimate this year’s income before any conversion: interest, dividends, capital gains, pensions, part-time work.
- Find the ceiling you want to stay under. For many couples that’s the top of the 12% bracket ($100,800 of taxable income in 2026). For some, it’s the top of the 22% bracket ($211,400). If you’re 65 or older, also watch the $150,000 MAGI level for the senior deduction and the IRMAA thresholds.
- Convert the difference, ideally in November or December, once you have a clear picture of your full-year income.
- Set aside the tax. Make an estimated tax payment by the January 15 deadline or increase withholding elsewhere so you don’t owe an underpayment penalty.
- Repeat each year until Social Security, a pension, or RMDs close the window.
Don’t forget the survivor angle. When one spouse dies, the other moves to single filing, where the 12% bracket ends at just $50,400 of taxable income, half the joint threshold. Income often doesn’t drop by half. Converting while you’re both alive and filing jointly can protect the surviving spouse from a bigger bill.
Before you pull the trigger, get a clear view of your spending and cash flow. The SuperMoney app lets you track spending across your accounts and set financial goals, which makes it easier to know how much cash you can set aside for the conversion tax without dipping into your emergency fund. For larger conversions, it’s also worth running the numbers with a tax professional or fee-only planner.
The bottom line
The first few years of retirement can be the cheapest tax years of your life. If you have a large traditional IRA and you’re not yet collecting Social Security or taking RMDs, look hard at converting enough each year to fill up your low brackets. For 2026, the deadline is December 31. Don’t wait until your RMD letter shows up to think about taxes. By then, the window’s already closed.
Key takeaways
- For 2026, the 12% bracket for married couples filing jointly runs up to $100,800 of taxable income.
- Couples 65 and older can deduct about $47,500 in 2026, including the new $6,000-per-person senior deduction.
- In our example, converting $128,300 costs about $11,600 in federal tax, an effective rate near 9%.
- RMDs start at 75 for anyone born in 1960 or later, often pushing retirees into the 22% bracket.
- Your 2026 income sets your 2028 Medicare premiums, so check IRMAA thresholds before large conversions.
- Roth conversions for the 2026 tax year must be completed by December 31, 2026.
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