A Roth conversion strategy at Ritholtz Wealth Management is a year-by-year plan for moving money from traditional IRAs into a Roth IRA, sized around your retirement spending, tax bracket and Medicare premiums. Waiting too long can leave RMDs starting at age 73, or age 75 for people born in 1960 or later, that cannot be converted. One oversized conversion can move a single filer’s Part B premium from $202.90 to $527.50 a month for a year.
What age makes a Roth conversion strategy worth running?
A Roth conversion strategy is most useful in the gap between retiring and the first RMD, when annual IRA conversions can fit around spending, pension income, rent and Medicare thresholds. For people born in 1960 or later, the IRS says RMDs begin at age 75, and an RMD cannot enter a Roth IRA.
Once salary stops, your monthly retirement income may come from rent, a pension, taxable-account sales and IRA withdrawals. The conversion amount sits on top of those income lines, so the plan also decides which account pays the tax. This is often worth running when pre-tax savings dwarf expected spending, such as a $2.3M portfolio held mostly in IRAs.
From age 63, every conversion can affect Medicare premiums two years later. Look at the recharacterization row first. The old idea that you can undo a conversion after a market drop is the belief that creates the ugliest surprise.
From age 63, total known income and convert only to the next IRMAA line minus a $5K to $10K cushion. Less than $10K of room? Skip that year.
| Common belief | What the rule says | What it means for you |
|---|---|---|
| I can undo it if stocks drop | Conversions can’t be recharacterized | Size it on known income only |
| Convert once RMDs start | An RMD can’t be converted | Born 1960+: convert before age 75 |
| Roth withdrawals raise Medicare premiums | Qualified Roth withdrawals aren’t in IRMAA MAGI | Only the conversion year counts |
| The kids inherit it tax-free anyway | Most non-spouse heirs empty IRAs in 10 years | Heirs pay ordinary tax at their rates |
| Let the custodian withhold the tax | Withheld tax isn’t converted | Pay tax from the taxable account |
Ritholtz Wealth Management computes the conversion around monthly spending
Retirees often pick a round conversion amount in December, then discover rent, fund distributions or realized gains were already in the year. Ritholtz Wealth Management begins with the cash you need each month and income already on the books, then leaves a cushion before making the conversion. Market predictions don’t enlarge the number.
The October income estimate
Why the tax usually comes from taxable assets
- 1. Monthly cash map: We write down spending and map rent, pension payments, dividends and planned taxable-account sales for the year.
- 2. October or November estimate: We total fixed income and expected fund capital-gain distributions. Known income, not a hot market forecast, sets the starting point.
- 3. Conversion room: We measure the space to the next tax bracket or IRMAA line and hold back $5K to $10K for a late 1099 surprise. A conversion cannot be recharacterized.
- 4. Tax payment and review: Taxable-account cash normally pays the tax, so the full amount reaches the Roth. We also check that five years of spending remains in bonds and cash, convert in December, then revisit the math when 1099s arrive in early spring.
When a formal conversion plan can wait
A formal conversion strategy can wait if later RMDs would stay modest, such as with a $150K IRA, or if the tax must come from the IRA itself. While you still draw a salary, build Roth savings at work first; for 2026, a 401(k) accepts up to $24,500 in employee deferrals. Revisit the analysis after full-time pay stops. It also may not fit an IRA intended for charity through qualified charitable distributions after age 70½. This page is general education, and a CPA should confirm the return.
How much can rental income squeeze conversion room?
Rental income can reduce conversion room dollar for dollar because it adds to the income Medicare uses for IRMAA. A retiree age 64 with $30K of net rent and $20K of realized gains has used $50K before converting a dollar. Under the $109K single-filer line, that leaves $59K before any cushion.
For illustration, Olga is a hypothetical 64-year-old, widowed retired software architect with a paid-off house, a three-fund portfolio and $2.3M in savings. She nets $30K a year from a duplex she kept after her husband died and spends $8K a month, or $96K a year. She sells $77K from her taxable account: $66K for spending plus $11K for conversion tax. Those sales realize $20K of long-term gains; gains tax is left out here to keep the math simple.
Her income before converting is $30K of rent plus $20K of gains, or $50K. Using the $109K single-filer IRMAA line and a $9K cushion, she converts $50K and reaches $100K of MAGI. At an assumed 22% tax rate, $50K × 22% equals an $11K conversion tax. Rent pays $30K of spending, while the taxable sale covers the remaining $66K and the tax, so no IRA money pays the bill.
Olga keeps $66K a year × five years, or $330K, in taxable-account bonds and cash for spending. That keeps the conversion tax from forcing a stock sale in a down year. Stocks held inside a Roth can still fall below the amount converted. If she converts $50K from age 64 through 74, 11 years × $50K equals $550K moved before RMDs begin at age 75, before growth. CMS adjusts IRMAA lines over time, so Ritholtz Wealth Management rechecks the line each fall.
Olga’s income before the conversion
Keeping five years of spending protected
When Medicare’s letter arrives two years later
A conversion made in December can raise Medicare costs two years later, even though the tax return felt finished long ago. Picture a single filer who converts $150K at age 64 and forgets $30K of rent plus $20K of realized gains. MAGI reaches $200K. At age 66, the Social Security Administration's IRMAA notice can set Part B at $527.50 a month against the $202.90 standard premium. That is $324.60 more a month, or about $3,900 for that year. The conversion cannot be reversed, so the calculation starts from income lines already known, never from a pleasingly round number.
Your questions about a Roth conversion strategy, answered
By what point in the year should a retiree with rental income settle on the conversion amount?
Set a working conversion amount in October or November, when rent, pension payments, realized gains and estimated fund distributions are easier to total. Ritholtz Wealth Management can then hold back a $5K to $10K cushion for a late 1099. A December conversion still works when the income estimate is solid.
Why pay tax on a conversion now if my tax rate might be lower after age 75?
Paying tax now makes sense only when the known tax cost and Medicare effect compare well with later RMD years or likely heir tax rates. A large traditional IRA can produce taxable RMDs at age 75. The analysis tests several annual amounts; it does not assume that earlier tax is always better.
What happens if a Roth conversion pushes my income one dollar over an IRMAA line?
Crossing an IRMAA line can place you in the next Medicare premium tier for the affected year. The Social Security Administration generally uses income from two years earlier, so the charge can arrive long after the conversion. The conversion cannot be undone, which is why a cushion matters.
Once I’m past age 59½, can I spend converted Roth money in the same year without a penalty?
Usually, a person older than age 59½ can withdraw converted principal without the 10% early-withdrawal penalty. Tax-free treatment of Roth earnings has separate IRS requirements, including the five-tax-year requirement for qualified distributions. Spending converted money quickly also defeats much of the reason to convert it.
If both of my children have high-earning careers, should I convert more before they inherit my IRA?
High-earning children may be a reason to test larger conversions, because inherited traditional IRA withdrawals can add to their ordinary income. Most non-spouse heirs must empty inherited IRAs within 10 years. Their tax situation, your own Medicare cost and charitable plans still matter more than a blanket conversion target.
How much of my portfolio should stay in a taxable account just to pay future conversion tax?
Keep enough taxable bonds and cash to cover planned spending and conversion tax without selling stocks after a market drop. In Olga’s illustration, $66K a year of spending for five years meant $330K set aside before the conversion tax. Ritholtz Wealth Management checks that reserve before suggesting an annual amount.
How long is your Ritholtz Wealth Management Roth conversion conversation?
In the opening meeting we total a year of spending and each income line, mark the IRMAA lines that apply to you and count the years left before RMDs. Ritholtz Wealth Management can hold it by video conference or telephone for households nationwide, and there is no published phone number. Send a note through the site's request form.
Bring your most recent IRS Form 1040 and the prior year’s return, Schedule E if you receive rental income, current IRA and brokerage statements, and any IRS Form 8606 showing nondeductible IRA basis. The client minimum is $500K in investable assets. We discuss the fee openly during that first conversation and confirm it in writing before work begins.
Sources
This article provides general information only and is not individualized investment, tax or legal advice. Investing involves risk, including the possible loss of principal. Talk to a qualified professional about your specific situation before making any financial moves.