Once you turn 73, the IRS requires you to withdraw a minimum amount from traditional IRAs and 401ks each year, and those withdrawals are taxed as ordinary income. Large RMDs can push you into a higher bracket and trigger Medicare surcharges. Convert some traditional IRA funds to Roth before RMDs begin to shrink the future tax hit.
The trap builds quietly. Every dollar you leave in a traditional IRA or 401k keeps compounding, and so does the tax bill attached to it. Once withdrawals become mandatory, a large balance can force out more income than you need to live on. The IRS sets the schedule, not you.
The fix is timing. The years between your last paycheck and your first RMD are usually the lowest-tax years of your adult life: no salary, no Social Security yet, no forced withdrawals. Each one is a chance to move money out of your traditional IRA at today’s rate instead of the higher rate a decade of compounding will create.
Converted dollars land in a Roth IRA, where no RMD ever applies to you and the money grows tax-free from then on. A smaller traditional balance means smaller forced withdrawals later. That’s the whole point.
Work bracket by bracket. Each year, estimate your taxable income, then convert just enough to fill your current bracket without spilling into the next. Pay the conversion tax from cash outside the IRA so the full converted amount keeps working.
Two cautions. A conversion counts as ordinary income in the year you make it, so a big one can cause the exact bracket jump you’re trying to avoid. And Medicare premiums look back two years at your income, so conversions after age 63 can raise what you pay at 65. A tax pro can map the math for your situation.
The window closes for good once your first RMD comes due. Map your brackets the year you retire, and treat every low-income year before then as bracket room you either use or lose.
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