Why converting before age 72 could be one of the smartest moves you make
When it comes to retirement planning, there’s one powerful strategy that doesn’t get nearly enough attention: the Roth conversion.
If you’re in or nearing retirement and still holding a traditional IRA or 401(k), converting some of that money into a Roth IRA—before you hit age 72—could be one of the smartest tax moves you ever make. This isn’t just about minimizing taxes now; it’s about securing tax-free income for the rest of your life and protecting yourself from future tax increases.
Let’s break it down in plain English.
What Is a Roth Conversion?
A Roth conversion means taking money from a traditional retirement account—like a traditional IRA or 401(k)—and moving it into a Roth IRA. When you do this, you pay income tax on the money you convert now, but the money grows tax-free from then on. And here’s the kicker: once it’s in the Roth IRA, you’ll never owe taxes on it again.
No taxes on your withdrawals.
No taxes on your growth.
No required minimum distributions (RMDs) when you turn 73 (or 75 for younger retirees).
No taxes for your heirs if you leave it to them.
Why Convert Before Age 72?
The years between retirement and age 72 (the age when RMDs kick in) are what some financial pros call a “tax sweet spot.”
Here’s why:
- You’re no longer working, so your income is likely lower.
- Social Security may not have started yet (or is modest).
- You haven’t hit RMD age, so you have more control over your taxable income.
This window gives you the perfect opportunity to convert chunks of your IRA into a Roth IRA while you’re in a lower tax bracket. Yes, you’ll pay tax now—but at a lower rate than you might later.
Once RMDs start, your tax flexibility drops dramatically. Uncle Sam will force you to withdraw a certain amount from your IRA each year, whether you need it or not, and those withdrawals are taxable. That added income can push you into a higher bracket, increase your Medicare premiums, and even trigger taxes on your Social Security benefits.
A well-timed Roth conversion can head all that off.
A Simple Example
Meet Karen, age 65. She just retired and has $500,000 in a traditional IRA. She hasn’t started Social Security yet and is living off cash savings, so her taxable income is low.
Karen decides to convert $50,000 of her IRA to a Roth this year. Because her income is low, this keeps her in the 12% tax bracket. She pays $6,000 in taxes now.
Here’s what she gains:
- That $50,000 can now grow tax-free forever.
- It won’t count toward her RMDs when she turns 73.
- She won’t owe a penny of tax when she withdraws it—or when she passes it to her kids.
- Her future RMDs will be smaller, keeping her Medicare premiums and taxes lower in her 70s and beyond.
By converting a little each year from now until age 72, she can dramatically shrink the size of her taxable IRA and lock in lower tax rates for life.
But Won’t I Pay More Taxes Now?
Yes. A Roth conversion means paying tax this year on the amount you convert. That can feel painful—but it’s often a smart tradeoff.
Here’s why:
- Tax rates today are relatively low, historically speaking.
- Congress could raise taxes in the future to deal with the national debt.
- When you reach age 73, RMDs could push you into a much higher tax bracket.
- Converting now lets you take control of when and how you pay taxes.
In short: a small tax bill now could save you a huge tax bill later.
How Much Should You Convert?
That depends on your income, your tax bracket, and how much you can afford to pay in taxes out of pocket.
Here are some general tips:
- Don’t convert so much that you jump into a higher tax bracket. For example, if you’re in the 12% bracket, aim to convert just enough to fill it—but not spill into the 22% range.
- Convert a little each year between retirement and age 72. This “laddered” approach helps spread the tax bill and avoids surprises.
- Pay the taxes with outside funds. Don’t dip into your IRA to pay the taxes on the conversion, or you’ll lose some of the benefit.
A financial advisor or tax professional can help you calculate the sweet spot.
Bonus Benefit: Tax-Free Legacy
Another perk of Roth IRAs? If you don’t end up needing the money, your heirs inherit it tax-free (though they must withdraw it within 10 years).
Compared to a traditional IRA—which is fully taxable to your heirs—this can be a major advantage for your loved ones.
Common Roth Conversion Mistakes to Avoid
Let’s avoid the most common pitfalls:
- Converting too much at once. This can spike your tax bill and possibly your Medicare premiums.
- Not planning ahead. Roth conversions work best as part of a multi-year tax strategy.
- Using IRA funds to pay the tax. This reduces your future tax-free growth.
- Doing it alone. It’s worth consulting a tax professional to run the numbers.
Done right, a Roth conversion is not just a tax move—it’s a retirement income strategy.
What If I’m Already Over 72?
It’s not too late! Even after RMDs begin, you can still do Roth conversions—you just have to take your required minimum distribution first before converting anything else.
It may still make sense depending on your situation, especially if you expect to live a long time, want to reduce future RMDs, or are thinking about your heirs.
Final Thoughts
Retirement isn’t just about what you have—it’s about what you keep. That’s why Roth conversions can be such a powerful tool.
By converting before age 72, you can take advantage of lower tax brackets, reduce your future RMDs, avoid higher Medicare premiums, and create a lasting stream of tax-free income.
It’s not just smart tax planning—it’s peace of mind.
Want More Strategies Like This?
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Disclaimer: For Educational Purposes Only
The content on this website is intended for general educational use and should not be considered personalized financial, legal, or tax advice. Always consult a qualified professional before making financial decisions. All investments carry risk, and past performance is not a guarantee of future results. The author assumes no liability for actions taken based on this content.