Should I Do Roth Conversions Before RMDs Begin?

Roth conversions before required minimum distributions begin can make sense when those years are your lower-income years. You move pretax money into a Roth account, pay tax at that year's rates, and may shrink the balance that later RMDs are calculated on. The same conversion can be a poor fit if it collides with a pension, a home sale, or a Medicare premium threshold. "Before RMDs" is a window worth opening. It is not an order to convert.

A required minimum distribution is the amount many traditional IRAs and similar pretax accounts must pay out once you reach the age that applies to your birth year. The IRS sets that age and the life-expectancy tables. Do not assume a single age from memory. After RMDs start, the required withdrawal is included in income whether or not you wanted that income, and it uses up tax-bracket room you might rather have used for a voluntary conversion.

Why the years in between can look different

Picture someone who retires at 65 and whose RMDs will not start until their early 70s, if that is the age the IRS assigns to their birth year. Wages have stopped. Social Security might be delayed. The tax return can be unusually quiet. A conversion in that quiet stretch is taxed without being stacked on a salary. Once RMDs begin, the required withdrawal and the conversion would be added together. The same $25,000 conversion can cost more tax in an RMD year than it did five years earlier.

Converting during the window can also reduce future RMDs, because RMDs are based on the pretax balance. Money already in a Roth IRA is not subject to lifetime RMDs for the original owner under current rules. That is a planning feature, not a promise that today's rule will be identical in 15 years. Read the current IRS page on retirement topics: RMDs when you run the numbers.

What still limits the conversion

• The bracket you are willing to fill. How much to convert is covered in how much to convert to Roth each year.
• IRMAA. Medicare's income-related monthly adjustment amount can raise Part B and Part D premiums when income from two years earlier crosses a threshold. A conversion at 65 can show up in premiums around 67. Details are in Roth conversions and IRMAA.
• Cash for the tax. The cleanest conversions are paid from money outside the IRA, so the full amount stays in the Roth account.
• Spending needs. If you must withdraw from the IRA to live, that withdrawal is already income. A conversion on top of it may not fit.
• A spouse's income. One partner's pension can fill the bracket the other hoped to use.

Tradeoffs

Waiting until an RMD year to "see what happens" can mean you never get the quiet years back. Converting too aggressively before RMDs can mean you pay 24% or more, plus a Medicare surcharge, to avoid a future withdrawal that would have been taxed at a similar rate. The comparison is future tax rate versus today's tax rate, with Medicare and survivor income included. If you expect to be in a much lower bracket later, a large conversion now can be the expensive choice. If a surviving spouse will file as a single person on a similar income, later brackets can be higher, and some conversion during the window can look more reasonable.

Withdrawal order still matters. Which account you spend from changes how much bracket room is left for a conversion. Reducing taxes in retirement is the wider project. A conversion is one lever.

Common mistakes

People convert in the same year they sell a house or take a large capital gain, then are surprised by the combined income. Others ignore a spouse who is still working. A third mistake is converting shares you might need to spend within five years and then tripping a Roth withdrawal rule. And some households delay every conversion until the first RMD, when the required withdrawal has already claimed the lowest brackets.

What this means for your retirement plan

Mark the year full-time wages are likely to stop and the year RMDs are likely to start for each spouse. The years between them are candidates, not commitments. Fill in Social Security start dates before you decide, because those checks also use bracket room. See whether your retirement years create potential Roth-conversion opportunities.

Frequently asked questions

Do I have to finish conversions before my first RMD?

No. You can convert after RMDs begin. You generally must take the RMD itself first; an RMD is not eligible to be converted. The RMD uses taxable income before any extra conversion you choose.

Will conversions reduce my future RMDs?

They can, because the pretax balance used in the RMD formula may be smaller. They do not reduce the RMD already required for the current year. The size of any future reduction depends on how much you convert and how the remaining investments change.

What if my RMD age is not the age I remember?

Congress has changed the starting age. Use the IRS rule for your birth year. A plan built on the wrong age will mis-state the length of the conversion window.

Is a conversion in my 60s automatically better than one in my 70s?

Often the 60s are a lower-income decade, which can make the tax cost lower. A large pension or a working spouse can remove that advantage. Compare the years. Do not assume the earlier year wins.

Related reading

• How much should I convert to Roth each year?
• Will a Roth conversion increase my Medicare IRMAA premiums?
• How can I reduce taxes in retirement?
• Retirement withdrawal order

This article is educational and not a recommendation to convert before RMDs. Confirm your RMD age and the tax treatment of a conversion on IRS.gov, and ask a qualified tax professional about your return.