Weekend Reading: Roth Conversions Play Key Role in Defusing a Retirement Tax Bomb

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading when to do roth conversions Weekend reading when to do roth conversions
Weekend Reading

One of the elements of a strategic tax plan can include utilizing Roth IRAs, which offer tax-free qualified withdrawals. However, when you convert a pre-tax account is crucial, as each dollar converted is taxed as ordinary income.


Timing your taxes: Leveraging Roth conversions during early retirement can help maximize your tax efficiency. Beyond that, it all comes down to carefully analyzing your tax bracket. To begin, it can help to identify several windows of opportunity. They include:

📌 Before enrolling in Medicare: While employing Roth conversions between retirement and age 62 is ideal, they can still add tax value even if you do end up triggering Medicare means testing, depending on your financial situation.

📌 Before taking Social Security or pension income: Once these income streams are pulled, your taxes could be higher.

📌 Before RMDs begin: Required minimum distributions begin at age 72. If you want to convert beyond that point, you could find yourself holding a retirement tax bomb.

📌 When markets are down: In times of market volatility, Roth conversions, regardless of the amount, can help eliminate a larger percentage of tax liability.

Plan now, to save later: Diffusing your tax time bomb can be likened to diffusing a real-life bomb. It takes time, consideration and precision.