Roth Conversions for Pre-Retirees: Why Waiting Until RMDs Can Cost You More in Taxes and Medicare Premiums

The Real Reason Roth Conversions Get Ignored

If Roth conversions are such a powerful tax strategy, why do so many people never do them?

Most pre-retirees assume that if a Roth conversion made sense, their advisor or CPA would have already recommended it.

That assumption is usually wrong.

Not because your advisor is lazy.Not because your CPA can’t do the math. But because Roth conversions require forward-looking planning, most advice is built to look backward.

Roth conversions don’t show up neatly on last year’s tax return. They show up in lower taxes, lower Medicare premiums, and more control years — even decades — down the road.

That disconnect is why Roth conversions are often ignored until it’s too late to use them effectively.

Roth Conversions Are a Forward-Looking Tax Strategy

A Roth conversion is not a tax trick. It’s a forward-looking tax strategy.

It forces one simple question: When do you want to pay taxes — now, or later, when you have fewer options?

Most CPAs are trained to focus on tax compliance:

• What happened last year

• What income was earned

• What deductions apply

  
  

That’s valuable work. But it’s backward-looking by design.

Roth conversions require projecting:

• Future tax brackets

• Required Minimum Distributions (RMDs)

• Social Security income

• Medicare premium thresholds

• Portfolio growth over time

  
  

That kind of analysis doesn’t fit neatly into a tax return. So it often gets pushed aside.

Why Many Financial Advisors Don’t Recommend Roth Conversions

This part makes people uncomfortable, but it matters.

Most financial advisors are compensated based on assets under management (AUM). In other words, advisors are compensated by a % of your account balance.

A Roth conversion often requires:

• Paying taxes out of pocket

• Liquidating part of an IRA

• Temporarily reducing managed assets

  
  

Even when a Roth conversion clearly benefits the client over the long term, it can reduce advisory fees in the short term. If a firm had 200 clients, each converting $100,000 from an IRA to a Roth, and the conversion was in the 24% tax bracket ($24,000 withheld), the firm would lose $4,800,000 in AUM, or $48,000 in annual revenue each year. There is no incentive for an adivsor to do this other than it's the right thing to do for the client

That doesn’t mean advisors are dishonest. It means incentives shape behavior.

Roth conversions are often ignored, not because they don’t work, but because they disrupt the traditional investment-only advisory model.

The Risk of Waiting Until Required Minimum Distributions (RMDs)

For many pre-retirees, the default strategy is waiting.

“I’ll be in a lower tax bracket later.” “I don’t want to pay unnecessary taxes now.” “Let’s see what tax laws do.”

The problem is that RMDs don’t wait.

Once RMDs begin:

• They are mandatory

• They increase taxable income every year

• They stack on top of Social Security

• They reduce your control over tax brackets

  
  

What feels like tax avoidance in your 50s often turns into forced taxation in your 70s.

How RMDs Can Push You Into Higher Tax Brackets

RMDs are calculated based on account size and life expectancy. Larger IRAs mean larger required withdrawals.

Those withdrawals:

• Increase ordinary income

• Push more Social Security into taxation

• Compress tax brackets later in retirement

  
  

At that point, Roth conversions become far less effective — and sometimes impossible without major tax consequences.

Roth Conversions and Medicare IRMAA

Taxes aren’t the only issue.

Roth conversions and RMDs also affect Medicare Part B and Part D premiums through IRMAA (Income-Related Monthly Adjustment Amount).

Medicare looks at your income from two years prior. Cross certain thresholds, and premiums increase — sometimes by thousands of dollars per year.

How Higher Income Can Increase Medicare Part B and Part D Premiums

Large RMDs can:

• Increase taxable income

• Trigger IRMAA surcharges

• Raise Medicare premiums for years at a time

  
  

Strategic Roth conversions earlier in retirement can reduce future RMDs and help control Medicare costs later.

This is often overlooked — and rarely explained clearly.

The Best Window for Roth Conversions Before Retirement

There is usually a golden window for Roth conversions:

• After retirement

• Before RMDs

• Before or early in Social Security

• When income is temporarily lower

  
  

For many people, this window lasts 5 to 10 years.

Using it intentionally can:

• Smooth lifetime tax brackets

• Reduce future RMDs

• Lower Medicare premiums

• Create tax-free flexibility later in retirement

  
  

Wasting it means fewer options later.

Roth Conversions for Pre-Retirees Ages 55–65 With Large IRAs

This matters most if you:

• Are between the ages of 55 and 65

• Have $500,000 to $5 million in IRAs

• Have worked with an advisor for years

• And have never seen a coordinated tax strategy

  
  

At this stage, small annual decisions compound into large lifetime outcomes.

Roth Conversions Are About Tax Control, Not Tax Avoidance

This is the key reframe.

The goal of a Roth conversion strategy is not to eliminate taxes.

It’s to:

• Pay taxes when rates are known

• Avoid forced income later

• Maintain control over your balance sheet

Roth conversions are about certainty, flexibility, and control — not short-term tax minimization.

Why Roth Conversions Require a Multi-Year Strategy

Roth conversions work best when they’re planned over time.

A proper strategy considers:

• Current and future tax brackets

• Medicare IRMAA thresholds

• Social Security timing

• RMD projections

• Portfolio structure

• Available cash reserves

  
  

This is not a one-year decision made during tax season. It’s a multi-year planning strategy that coordinates taxes, investments, and retirement income.

Final Thoughts for Pre-Retirees With $500,000–$5 Million in IRAs

If no one has ever walked you through a forward-looking Roth strategy, it doesn’t mean you don’t need one.

It usually means:

• Your CPA is focused on compliance

• Your advisor is focused on investments

• And no one is quarterbacking the entire plan

  
  

Clarity now beats regret later.

Frequently Asked Questions About Roth Conversions

Should pre-retirees do Roth conversions before RMDs?

For many pre-retirees, Roth conversions before RMDs can reduce future tax brackets, smooth retirement income, and lower Medicare IRMAA. The key is converting strategically over multiple years.

Do Roth conversions increase Medicare premiums?

Roth conversions increase taxable income in the year they occur, which can temporarily raise Medicare Part B and Part D premiums if IRMAA thresholds are crossed. However, they may reduce future Medicare costs by lowering RMDs later.

How much should I convert to a Roth each year?

The ideal Roth conversion amount depends on current tax brackets, future income, Medicare thresholds, and long-term projections. Many strategies aim to fill a tax bracket without triggering higher Medicare premiums.

Why hasn’t my advisor recommended a Roth conversion?

Many advisors focus on investments or short-term tax savings rather than long-term tax planning. Roth conversions require forward-looking analysis that is often missing from traditional advisory models.