The Window Most People Don’t Know They Have

My buddy Ray retired five years ago at 63. Good pension. Healthy 401(k). No debt. He did everything right.

Then he did nothing.

Not with his life. He stays busy. Fishes. Travels. Keeps the house perfect. But his IRA? He just let it sit there. Didn’t touch it. Figured he’d deal with it when the IRS made him.

Last spring we were on his deck. He was proud of how his account had grown. I asked him what he planned to do when he turns 73 and the government starts forcing money out.

He shrugged. “I’ll pay the taxes.”

I told him he was about to pay a lot more than he needed to. Because between the day you retire and the day your RMDs kick in, there’s a window. And most people don’t even know it’s open.

Here’s how it works. You retire. You stop earning a paycheck. Your income drops — maybe a pension, maybe some interest, but nothing close to what you made while working.

Meanwhile, your IRA keeps growing. Six percent a year, seven, whatever the market gives you. By the time you hit 73, the IRS says you have to start pulling money out. Those are your Required Minimum Distributions — RMDs. (Under current rules, that kicks in at 73. If you were born in 1960 or later, it’s 75 — which means even more time.)

The problem? That forced withdrawal gets stacked on top of your Social Security. And suddenly you’re in a tax bracket you haven’t seen since you were working. Except now you’ve got no paycheck to absorb the hit.

But those years in between — from when you retire to when RMDs start — your taxable income is low. Sometimes very low. That gap is the window.

The move is called a Roth conversion. You take money from your traditional IRA and move it to a Roth. You pay tax on it now — while your rate is low. Then it grows tax-free. Forever.

Let’s use real numbers. Say you and your wife file jointly. You’re 63. You just retired. You’ve got $1.2 million in a traditional IRA and about $40,000 a year coming in from a small pension and some savings interest.

In 2026, the standard deduction for married couples is $32,200. That eats most of your $40,000. You’ve got about $7,800 in taxable income. That’s the 10% bracket.

The 12% bracket for married filers goes up to $100,800 of taxable income. You’ve only used $7,800 of it. That means you’ve got about $93,000 of room. You can convert $93,000 from your traditional IRA to a Roth and pay just 12 cents on the dollar.

Do that every year for eight or nine years. You move $700,000 or more out of the traditional IRA — at 12% — before the IRS ever forces a dime out at 22% or 24%.

Now think about what happens if you don’t convert. That $1.2 million grows at 6% for ten years. By 73, it’s north of $2 million. Your first RMD — using the IRS divisor of 26.5 — is about $75,000. Stack that on top of Social Security, and you’re looking at $120,000-plus in taxable income. That’s 22% or higher on every dollar.

And it gets worse every year. The balance keeps growing. The RMDs keep climbing. The tax bill follows.

There’s one thing that can blow this up: Medicare premiums.

Medicare uses a two-year lookback. So the income on your 2024 tax return sets your Medicare premium in 2026. If you convert too much in the wrong year, you trigger something called IRMAA — the Income-Related Monthly Adjustment Amount. Fancy name. Simple result: your Part B premium jumps.

In 2026, the standard Part B premium is $202.90 a month. Cross $218,000 in income as a married couple, and it goes up to $284.10. Cross $274,000, and it’s $406. Per person, per month.

So here’s the rule: know exactly where the IRMAA brackets are before you convert. If you’re close to a line, convert less in that year. Don’t blow an extra $2,000 a year in premiums to save $1,500 in taxes.

This is where a good CPA earns their fee. Not a financial advisor selling products. A CPA who can model the numbers year by year.

▸ Pay the tax from a bank or brokerage account. Never pay it from the IRA itself. That shrinks the amount going into the Roth, and it defeats the whole point.
▸ Fill the bracket, don’t bust it. Convert enough to reach the top of the 12% bracket — or the 22% if you’re comfortable — but stop before you jump to the next one.
▸ Convert before you claim Social Security. Once benefits start, they eat up bracket space. Your best years are before age 70 if you’re delaying your claim.
▸ Spread it out. Don’t convert everything in one year. That’s how you spike into the 32% bracket and get hit with IRMAA. Do it in pieces over five to ten years.
▸ Think about the survivor. When one spouse dies, the other files single. Single filers hit the 24% bracket around $105,700 in 2026. A big RMD on top of one Social Security check can push right past that line. Every dollar you convert now is a dollar your surviving spouse won’t get taxed on later.

Pull up last year’s tax return. Look at Line 15 — that’s your taxable income. Now look at how much space is left between that number and the top of your bracket.

That gap is your conversion number.

Call your CPA — not your broker, your CPA — and say: “I want to model a Roth conversion strategy from now until I turn 73. Show me the tax cost each year, the IRMAA impact, and the total savings over my lifetime.”

A good CPA can run that in a few hours. A great one will also show you the surviving-spouse scenario.

If your gap years are already ticking, don’t sit on this. Every year you wait is a year of cheap tax rates you didn’t use.

Ray called me last month. He’d met with his CPA. They ran the numbers together. Over eight years of conversions in the 12% bracket, he’ll move about $740,000 out of his traditional IRA. The tax bill on all of it? Roughly $89,000.

Without the conversions, that money would’ve been taxed at 22% to 24% when the RMDs kicked in. The savings, over his lifetime and his wife’s? Somewhere north of six figures.

“Why doesn’t everyone do this?” he asked.

I told him the truth. Most people don’t know the window exists. Their advisor doesn’t bring it up — because there’s nothing to sell. A Roth conversion doesn’t earn a commission. It doesn’t come with a dinner invite. It’s just math. Quiet, boring, life-changing math.

Ray’s doing his first conversion this month. He wished he’d started two years ago.

Don’t be Ray.

— Walter