For pre-retirees with significant traditional IRA or 401(k) balances, Roth conversions during the years before retirement may be a valuable tax planning tool, but timing and sizing the conversions correctly is what determines whether and how much the strategy works in your favor.
What is a Roth Conversion?
A Roth conversion is the process of moving funds from a traditional IRA or 401(k) — where contributions were made pre-tax — into a Roth IRA or Roth 401(k), where qualified withdrawals in retirement are tax-free. You pay income tax on the converted amount in the year of conversion. The goal is to strategically pay lower taxes now, rather than later when your rate may be higher
Converting All at Once vs. Over Time
Converting a traditional IRA to a Roth IRA can be a powerful tool for managing your long-term tax strategy. A key consideration is whether to convert your entire IRA in one year or spread the conversion over several years. Here is what to keep in mind:
- Tax Bracket Awareness: Converting all at once could push you into a higher tax bracket for that year, resulting in a larger immediate tax bill.
- Phased Conversions: Spreading the conversion over multiple years can help keep you in a lower tax bracket, potentially reducing your total tax liability.
This decision is highly personal and depends on your current and projected income, as well as your long-term goals.
The Tax Bracket Filling Approach
The goal of a well-designed Roth conversion strategy is not to convert as much as possible — it is to convert the right amount each year. The tax bracket filling approach means converting just enough to fill your current bracket without pushing income into the next one.
For example, if you are in the 22% bracket and have room before reaching the 24% threshold, you convert only up to that line. You pay 22% on the converted amount today instead of potentially 24%, 32% or higher when RMDs and Social Security arrive together and push your income up.
This requires modeling your current income, projected future income, Social Security timing, and expected RMD amounts years in advance. It is an annual exercise, not a one-time decision.
The Low-Income Window: When Conversions Are Most Valuable
For many pre-retirees, a potentially valuable conversion opportunity may be the period between retiring and when Social Security benefits and Required Minimum Distributions begin simultaneously. During this window, taxable income is often at its lowest point in decades, creating an opportunity to convert at rates that may be lower than those in the future. If you retire at 62 but delay Social Security to 70 and your RMDs do not begin until 73, you may have an 8-10 year window where strategic conversions make sense. Once Social Security, pension income and RMDs begin together, your taxable income may rise substantially and the window closes.
Why Roth Conversions Can be Valuable in California
California taxes traditional IRA and 401(k) withdrawals as ordinary income at rates up to 13.3%, the highest state income tax rate in the United States. Converting during a low-income window may mean paying California tax at a lower rate today rather than a potentially higher rate when RMDs compound your income in retirement.
The Hidden Cost of Converting Too Much
Medicare Part B and Part D premiums are income-based. Above certain income thresholds, surcharges called IRMAA, Income-Related Monthly Adjustment Amounts, are added to your premiums. These surcharges are based on your Modified Adjusted Gross Income from two years prior, meaning a large Roth conversion today could trigger higher Medicare premiums two years from now.
A conversion that pushes you over a threshold can potentially add hundreds of dollars per month in Medicare costs which is why conversion amounts need to be sized carefully against both your tax bracket and these thresholds simultaneously. Retirees should consider that Social Security itself may be considered taxable income at the federal level depending on your total income. The exact amount of your Social Security benefit subject to federal income tax is determined by your "provisional income." Based on this calculation, 0%, 50%, or 85% of your Social Security income could potentially be subject to your federal tax bracket in a given year.
Canter Wealth models these constraints when sizing annual conversions.
Roth Conversion Is a Multi-Year Strategy, Not a One-Time Decision
A Roth conversion strategy is not something you decide once and execute. It requires annual review and recalibration as your income, tax law, account balances, and life circumstances change. Each year the question to consider is: how much makes sense to convert this year given where I am now and where I am headed?
At Canter Wealth, we model multi-year conversion scenarios for clients as part of their ongoing financial plan adjusting for changes in brackets, IRMAA thresholds, Social Security timing, and California tax law annually.
When a Roth Conversion May Not Make Sense
Roth conversions are not the right strategy for everyone. Conversions are generally less beneficial when:
- You expect to be in a significantly lower tax bracket in retirement than you are today
- You do not have funds outside the IRA to pay the conversion tax. Paying the tax from the IRA itself reduces the benefit
- You have a short time horizon before needing the funds
- The conversion would trigger IRMAA surcharges that outweigh the long-term tax savings
- Your estate will pass to heirs in a lower tax bracket who would potentially benefit from inheriting a traditional IRA
At Canter Wealth, we evaluate these factors before recommending a conversion strategy.
Roth Conversion FAQs
Q: Should I do a Roth conversion before I retire? A: For many pre-retirees with significant traditional IRA or 401(k) balances, Roth conversions during the low-income window between early retirement and when RMDs and Social Security or pensions begin may potentially significantly reduce lifetime taxes, especially in California, where traditional IRA withdrawals are taxed as ordinary income at up to 13.3%.
Q: How much can I convert to a Roth IRA each year? A: There is no IRS limit on annual Roth conversion amounts. The strategic limit is your tax bracket: converting more than fills your current bracket wastes the rate advantage. Conversion amounts must also be modeled against Medicare IRMAA thresholds, which are based on income from two years prior.
Q: Does California tax Roth conversions? A: Yes. California taxes Roth conversions as ordinary income in the year of conversion at rates up to 13.3%. The strategy may still be valuable if you convert at a lower rate today than you would face when RMDs and Social Security arrive together in retirement.
Q: What is the difference between a Roth conversion and a Roth contribution? A: A Roth contribution is a new deposit into a Roth IRA, subject to annual contribution limits and income limits. A Roth conversion moves existing pre-tax funds from a traditional IRA or 401(k) into a Roth IRA. There are no income limits on conversions and no annual limit on the amount converted.
Q: Is it too late to do a Roth conversion at 60? A: No. Many clients begin their most impactful Roth conversion years between ages 60 and 70, after retiring but before Social Security, pensions and RMDs begin. The key is having enough years for the converted funds to grow tax-free and enough time to seek to benefit from the lower lifetime tax liability.
Model Your Roth Conversion Strategy With a Fee-Only Advisor
We work with pre-retirees in San Diego and La Jolla to build multi-year Roth conversion plans that reduce lifetime taxes without triggering unnecessary bracket jumps or IRMAA surcharges.
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Disclosures: Tax laws are subject to change. The tax treatment of Roth conversions described on this page reflects current law as of 2026 and may change in the future. The impact of a Roth conversion strategy will vary based on individual circumstances including income, tax bracket, state of residence, and other factors. Canter Wealth does not provide tax, legal, or accounting advice. The information on this page is for general educational purposes only. We strongly recommend discussing the tax implications of any changes to your financial plan with your CPA or tax advisor before taking action.