Multi-year retirement tax planning
Roth Conversions Before Required Minimum Distributions
The years after work ends but before required minimum distributions begin may provide unusual control over taxable income. Planned Roth conversions can use some of that capacity—but paying tax early only makes sense when the projected long-term benefit justifies the cost.
Educational information only—not individualized tax advice. Roth conversions are generally taxable and cannot be reversed. Consult a qualified tax professional before acting.
Start with the planning window
Why consider Roth conversions before RMDs?
Before required minimum distributions begin, a retiree may have more control over how much taxable income is recognized from traditional retirement accounts. A partial Roth conversion can intentionally recognize some income now while reducing the traditional balance exposed to future RMDs.
This can be useful when current projected tax rates are lower than the rates expected later, when a surviving spouse may face less favorable brackets, or when the household values tax-free withdrawal flexibility. It can be harmful when the conversion pushes income too high, increases Medicare premiums, reduces valuable credits or is paid at a rate unlikely to be recovered later.
The short answer
Project taxable income without a conversion, identify the years before RMDs, test several conversion amounts and compare the lifetime result. Do not convert simply because an RMD is coming. Convert only when the projected benefits outweigh current federal and state taxes and other income-related costs.
Understand the future obligation
What required minimum distributions change
Required minimum distributions are amounts that must generally leave traditional IRAs and covered retirement plans each year after the applicable starting age. The calculation uses the prior year-end account balance and an IRS life-expectancy factor. The account owner remains responsible for taking the correct amount.
RMDs are generally included in taxable income except for any portion representing previously taxed basis. They cannot be rolled into another tax-deferred account. Roth IRAs are not subject to lifetime RMDs for the original owner under current federal rules, although beneficiaries are subject to distribution rules.
Once RMDs apply, the required amount must be distributed and is ineligible for rollover. A person may potentially convert additional eligible dollars after satisfying the year’s RMD, subject to the applicable rules.
Current starting ages depend on birth year and federal law. Confirm the applicable date rather than relying on an older retirement projection.
Look between major income events
When does the pre-RMD conversion window occur?
The potential window often begins after wages decline or stop and ends when RMDs begin. Social Security, pensions, annuities and a spouse’s income can narrow the window because they already occupy tax brackets.
Earned income may fall
Lower wages can create more control over taxable income, although severance, deferred compensation and final bonuses may delay the opportunity.
Another possible opening
Delaying benefits may leave additional tax capacity, but the portfolio withdrawals needed to fund spending must be included.
Distributions remain elective
The household can choose whether to withdraw or convert additional traditional-account dollars before mandatory distributions begin.
The brackets may compress
The survivor may have similar income with a different filing status, which can strengthen the value of planning while both spouses are alive.
A planning window is not automatically a conversion opportunity. Large capital gains, property sales, business income, health-insurance subsidies or other events may make a particular year unattractive.
Use the low-income years deliberately.
Map retirement, Social Security and RMD dates before the window closes—then test whether partial conversions improve the projected outcome.
Calculate more than the bracket
What does a Roth conversion cost?
The previously untaxed amount converted from a traditional IRA or eligible retirement plan is generally included in federal gross income for the conversion year. State treatment depends on residency and applicable law. For an Oregon resident, federally taxable conversion income will generally affect Oregon taxable income because Oregon starts with federal taxable income and applies state modifications.
After-tax IRA basis can change the taxable portion, but the federal pro-rata rules may require all traditional, SEP and SIMPLE IRA balances to be considered together. The conversion also increases adjusted gross income, which may affect calculations beyond the ordinary income-tax bracket.
Federal income tax
Add the taxable conversion to the projected return and measure the incremental tax—not merely the top marginal rate.
Oregon income tax
Include state tax and current Oregon modifications when evaluating the cash needed to complete the strategy.
Social Security
Conversion income can increase the taxable portion of Social Security when benefits have already begun.
Medicare IRMAA
Higher modified adjusted gross income can result in income-related Part B and Part D premium adjustments in a later year.
Credits and subsidies
Before Medicare eligibility, conversion income may affect health-insurance subsidies and other income-sensitive tax provisions.
Test multiple scenarios
How much should you convert before RMDs?
There is no universally correct conversion amount. A useful analysis starts with a projected tax return without a conversion, then layers in candidate amounts. Each scenario should show the current tax, available cash, future traditional balance, estimated RMDs and projected survivor outcome.
“Filling a bracket” can be a useful framework, but it is not a complete answer. Tax brackets are marginal, and a conversion can cross several other thresholds. The preferred amount may intentionally stop before an IRMAA tier, subsidy loss or another unfavorable interaction—or it may accept that cost when the longer-term benefit is compelling.
Preserve tax deferral
Maintains the traditional balance and avoids current conversion tax, but may leave larger future RMDs.
Use selected capacity
Recognizes a planned amount of income while retaining flexibility for later years.
Spread the decision
Revisits the amount annually as income, tax rules, markets and household needs change.
Accelerate the transition
Moves more assets to Roth but can create high current tax and collateral income-related costs.
Plan the cash movement
How should the conversion tax be paid?
Paying the tax from cash outside the retirement account can leave the full conversion invested in the Roth. Using retirement funds for withholding reduces the amount reaching the Roth and may create an additional early-distribution tax for someone under age 59½ unless an exception applies.
Outside cash is not automatically the best answer. It may be needed for spending, emergencies or near-term goals. Compare the opportunity cost of using that cash with the amount retained in the Roth and the tax consequences of every payment method.
Coordinate withholding and estimated payments with a qualified tax professional so the household does not confuse the amount prepaid with the actual incremental tax created by the conversion.
A completed Roth conversion generally cannot be undone.
Confirm the amount, tax payment, account instructions and year-end implementation timeline before moving the assets.
Measure what the tax buys
Potential benefits of converting before RMDs
Smaller future RMDs
Reducing the traditional account balance can reduce future required distributions relative to an otherwise identical strategy, although returns and future rules remain uncertain.
Tax-flexible spending
Qualified Roth withdrawals may fund large purchases or supplement income without adding federal taxable income under current rules.
Survivor planning
More Roth assets may help a surviving spouse manage taxable income after moving from a joint to an individual filing status.
Beneficiary flexibility
Inherited Roth accounts remain subject to beneficiary distribution rules, but qualified withdrawals may be income-tax-free.
Tax diversification
Holding taxable, traditional and Roth assets gives the household more choices when future spending and tax conditions change.
These are potential benefits, not guaranteed outcomes. Future tax law, investment returns, longevity, residency and spending can change the result.
Common implementation errors
What can go wrong with a pre-RMD conversion?
Ignoring other income
Dividends, gains, pensions, Social Security and a spouse’s earnings can use tax capacity before the conversion.
Converting the RMD
The required amount is not eligible for rollover and must be distributed before additional eligible dollars are converted.
Missing five-year rules
Roth qualified-distribution and conversion rules can matter when money may be needed soon.
Using one-year math
A current tax bill should be compared with future RMDs, survivor taxes and after-tax assets over time.
A repeatable annual process
How to evaluate conversions before RMDs
Confirm the RMD timeline
Determine the applicable starting age and identify every account that will be subject to required distributions.
Project income without a conversion
Include wages, pensions, Social Security, interest, dividends, capital gains and planned withdrawals.
Test candidate conversion amounts
Calculate incremental federal and state tax plus Medicare, subsidy and other income-related effects.
Compare the multi-year result
Estimate future RMDs, survivor taxes, account balances and after-tax assets with and without conversions.
Confirm implementation
Coordinate account instructions, tax payments, deadlines and reporting with the custodian and tax professional.
Repeat annually
Update the analysis as tax law, markets, spending, income and the household’s goals change.
Continue your retirement planning
Read about Roth conversion planning, tax planning in retirement, and building a retirement withdrawal strategy. Oregon public employees can also review Roth conversions for Oregon PERS members.
Verify current rules
Official Roth conversion and RMD resources
Required distributions
Review the IRS required minimum distribution FAQs.
IRA conversions
Review the IRS IRA rollover and Roth conversion FAQs.
Conversion reporting
Use IRS Publication 590-A and the current Form 8606 instructions.
Roth withdrawals
Review IRS Publication 590-B for distribution and five-year rules.
Medicare adjustments
Review Social Security’s information about income-related Medicare premium adjustments.
Common questions
Roth conversions before RMDs: FAQs
Why convert to a Roth before RMDs begin?
The pre-RMD years may provide more control over taxable income. Converting can reduce the traditional balance used for future RMDs while building Roth assets, but it creates current tax.
Can I convert my required minimum distribution to a Roth IRA?
No. An RMD is not eligible for rollover. After satisfying the year’s RMD, a person may potentially convert additional eligible retirement-account dollars.
How much should I convert before RMDs?
There is no universal amount. Test several conversion amounts using projected federal and state taxes, Medicare premiums, Social Security taxation, future RMDs and survivor outcomes.
Does a Roth conversion count as taxable income?
Yes. The previously untaxed amount converted is generally included in federal gross income for the year of conversion.
Can a Roth conversion increase Medicare premiums?
Yes. Conversion income can increase modified adjusted gross income used for income-related Medicare Part B and Part D premium adjustments in a later year.
Can conversions make more Social Security taxable?
Yes. If Social Security has begun, taxable conversion income can increase the combined income used to determine the taxable portion of benefits.
Are Roth conversions taxed by Oregon?
For an Oregon resident, federally taxable conversion income will generally affect Oregon taxable income, subject to current state modifications and individual circumstances.
Can I undo a Roth conversion if the tax is too high?
Generally, no. Conversions completed after 2017 cannot be recharacterized back to a traditional retirement account.
Should I complete conversions every year until RMDs?
Not automatically. Income, tax law, markets, Medicare exposure and cash needs should be reviewed each year before deciding whether and how much to convert.
Does Fairchild Capital provide tax advice?
No. Fairchild Capital provides financial planning and investment advisory services but does not provide tax or legal advice. A qualified tax professional should confirm tax treatment and reporting.
Take the next step
Decide how to use the years before required distributions begin.
Schedule an introductory conversation about your multi-year Roth conversion strategy and whether Fairchild Capital may be able to help.
