Tactical Roth Conversion 2025-2028: Critical Planning Opportunity for Retirees
Why this narrow window could save your family hundreds of thousands in taxes
If you’re sitting on a large traditional IRA and live in Texas, I want to share an opportunity with you.
The years 2025 through 2028 represent a perfect storm of tax opportunities that may never align this favorably again. As someone who’s helped Austin families convert tens of millions to Roth IRAs in the past five years, I want to share exactly how this works and why timing matters so much.
Let me start with a recent success story.
I worked with a Westlake couple who had $2.4 million in traditional IRAs. They were nervous about future tax rates and worried about leaving their tech-executive children a tax nightmare. Over three years, we systematically converted $1.6 million to Roth IRAs while keeping them in the 24% bracket.
The result? They’ll save an estimated $400,000 in lifetime taxes, their future required distributions dropped by 60%, and their children will inherit tax-free accounts instead of taxable ones.
This wasn’t luck. It was strategic planning using the exact framework I’m about to share with you.
What exactly is a Roth conversion? (The 60-second explanation)
Think of a Roth conversion as paying tomorrow’s taxes at today’s rates.
Here’s the simple version:
You move money from your traditional IRA (where you haven’t paid taxes yet) into a Roth IRA (where you’ll never pay taxes again). You pay income tax on the converted amount this year, but everything that happens after that – all growth, all withdrawals – is completely tax-free.
The key insight: You’re trading a known tax bill today for permanent tax elimination on potentially much larger amounts later.
No income limits apply to conversions. Even if you make too much to contribute directly to a Roth IRA, you can convert unlimited amounts from traditional accounts.
Important safety note: Unlike contributions, you can’t undo a conversion. Once it’s done, it’s done. This is why we plan each move carefully and break large conversions into smaller, manageable pieces.
Why 2025-2028 is your golden window
Three major policy changes have created an unusually favorable environment for conversions. Let me break down each one:
- Current tax rates are historically low
While we don’t know exactly what will happen, betting on lower future tax rates is historically a losing proposition.
- The SECURE Act changed everything for your heirs
This is the big one that many families don’t fully understand yet.
Before SECURE: Your children could inherit your IRA and take small age based required distributions over their entire lifetimes. A $1 million inherited IRA might last 40+ years with minimal tax impact.
After SECURE: Your children must empty inherited IRAs within 10 years. Period.
What this means in real dollars: If your tech-executive son inherits a $2 million traditional IRA during his peak earning years, he could face 37% federal taxes on every dollar. On the flip side, if he inherits a $2 million Roth IRA, every withdrawal is tax-free.
- You have more years before required distributions start – Make The Time Count!
SECURE 2.0 pushed the required minimum distribution age to 73. For many of my clients, this creates a 7-10 year “conversion window” between retirement and forced IRA withdrawals.
Here’s the opportunity: You retire at 62-65 with relatively low income, delay Social Security until 70, and have nearly a decade to systematically convert IRA dollars at favorable rates before RMDs kick in.
The four hidden taxes that can destroy your conversion strategy
Most financial articles focus only on income tax brackets. That’s a mistake. Your real tax rate on conversions includes four different components:
- Federal income tax (the obvious one)
This is what everyone talks about – 22%, 24%, 32%, etc. But it’s only the starting point.
- Medicare IRMAA (the stealth tax)
Once you’re on Medicare, high income triggers surcharges on your Part B and Part D premiums. These aren’t small adjustments – crossing certain income thresholds can add $8,000+ per year in extra premiums.
Want to more information on IRMAA? Read our Medicare IRMAA Blog
- Social Security taxation (the torpedo)
If you’re receiving Social Security benefits, additional income can cause up to 85% of those benefits to become taxable.
- Net Investment Income Tax (the 3.8% kicker)
For high earners, conversions can push you over the NIIT threshold, adding 3.8% to your investment income. While conversions themselves aren’t investment income, they increase your modified adjusted gross income, which determines NIIT exposure.
Client case studies from my Austin practice
Let me share three detailed examples that illustrate different conversion strategies:
Your step-by-step conversion planning framework
Here’s the exact process I use with every client. You can follow these steps with your current advisor or use them to evaluate any conversion proposal:
Build your 10-year income map
What to include:
- Wages and consulting income
- Pension payments
- Social Security (include planned start date)
- Rental property income
- Investment income (dividends, interest, capital gains)
- Future RMDs starting at age 73
Pro tip: Use conservative growth assumptions for your IRA.
The output: A year-by-year chart showing your baseline taxable income before any conversions.
Identify your conversion windows
Look for years with:
- Lower ordinary income (retirement, sabbatical, business sale timing)
- Room in favorable tax brackets (22% or 24% for most clients)
- Pre-Medicare years (more flexibility without IRMAA concerns)
- Pre-RMD years (maximum control over income timing)
Common windows I see:
- Ages 62-65: Retired but not yet on Medicare
- Ages 65-72: On Medicare but no RMDs yet
- Business sale years: Lower ordinary income despite large gains
- Widow/widower planning: Before the survivor faces single-filer brackets
Set your annual conversion targets
The bracket-filling approach:
- Choose your target bracket (often 24% for married couples)
- Calculate room remaining after baseline income
- Set conversion amount to fill that bracket without exceeding it
Plan your tax payment strategy
Option 1: Pay from non-IRA funds (preferred)
- Keeps your entire Roth balance intact for growth
- Typically provides best long-term results
- Requires adequate liquidity outside retirement accounts
Option 2: Pay from the IRA itself
- Reduces conversion effectiveness
- Sometimes necessary for liquidity reasons
- Requires larger gross conversion to net your target amount
Tax payment timing:
- Large conversions may require quarterly estimated payments
- Year-end conversions can use withholding to avoid penalties
- I often recommend 25% withholding on December conversions
Why not convert everything in January?
- Markets fluctuate – you might get better prices later
- Other income might come in higher or lower than expected
- Flexibility allows you to optimize based on year-end projections
Monitor and adjust each fall
October review checklist:
- Actual income vs. projections
- Capital gain distributions from mutual funds
- Any unexpected income or deductions
- Medicare IRMAA threshold proximity
- Investment performance impact on conversion values
November decision:
- Finalize exact conversion amount
- Schedule the transfer
- Arrange withholding or estimated payment
The biggest mistakes I see (and how to avoid them)
Converting while still in peak earning years
The error: Converting large amounts while you’re still working and in the 35-37% brackets.
Why it happens: People get excited about Roth conversions and want to start immediately.
The fix: Wait until you have a lower-income year, or do small conversions using available room in lower brackets.
Exception: Sometimes it makes sense to pay higher rates today if you expect even higher rates in the future, but this requires careful analysis.
Ignoring the Medicare IRMAA cliff
The error: When you exceed a Medicare IRMAA threshold, you can add thousands of dollaras a year to your Part B and Part D premiums.
Why it happens: People focus on tax brackets and forget about Medicare surcharges.
The fix: Model your Medicare premiums two years out for every conversion scenario. Sometimes paying 24% tax on $50,000 less conversion is better than paying 24% tax plus $3,000 extra Medicare premiums.
Not coordinating with Social Security timing
The error: Starting Social Security at 62 and then trying to do large conversions, creating massive “tax torpedo” effects.
Why it happens: Social Security and Roth conversion planning often happen in isolation.
The fix: Delay Social Security until 70 if you can afford it. This keeps your baseline income lower during prime conversion years AND increases your future Social Security benefit.
Converting everything too quickly
The error: Converting your entire $2 million IRA in one or two years.
Why it happens: Impatience and fear of future tax law changes.
The fix: Spread conversions over multiple years to stay in lower brackets. Yes, tax laws might change, but overpaying by 10-15 percentage points to rush conversions rarely makes sense.
Forgetting about state taxes
The error: Moving from Texas to California after retirement and doing conversions at California tax rates.
Why it happens: People don’t think about retirement location when planning conversions.
The fix: Complete your conversions while you’re still a Texas resident. California adds 9.3%+ to your conversion cost.
Frequently asked questions from Austin clients
“How do I know if conversion rates today are better than what I’ll pay later?”
You don’t know for certain, but consider these factors:
Arguments for converting now:
- Current rates are historically low
- Government debt suggests higher future rates
- Your personal tax situation (RMDs will push you higher)
- Estate tax benefits for heirs
Arguments for waiting:
- You expect lower personal income in the future
- Significant market declines could reduce conversion costs
- Tax-loss harvesting opportunities might offset conversion income
My general rule: If you can convert at 24% or lower, the long-term odds favor conversion for most high-net-worth families.
“What if the market crashes right after I convert?”
This feels terrible but usually doesn’t matter as much as people think.
Why: Your conversion benefit comes from the tax arbitrage (paying 24% now vs. 32%+ later), not from market timing. If you convert $100,000 of stock at $50 per share and it drops to $40 per share, you still have the same number of shares – just in a Roth instead of a traditional IRA.
The silver lining: Market drops create opportunities for additional conversions at lower prices.
“Should I convert my entire IRA or keep some traditional?”
Rarely convert everything. Here’s why:
Arguments for keeping some traditional:
- Provides flexibility if tax rates actually drop
- Gives you taxable income to “fill up” lower brackets in retirement
- Charitable giving strategies work better with pretax dollars
Arguments for substantial conversion:
- Eliminates RMD burden
- Protects heirs from high tax rates
- Provides tax diversification
My typical recommendation: Convert 60-80% over time, keeping some traditional for flexibility.
“How do conversions affect my estate planning?”
Immediate benefits:
- Removes assets from your estate (you pay taxes, reducing estate size)
- Gives heirs tax-free inheritance instead of taxable
- Simplifies inheritance planning (no RMD calculations for heirs)
Advanced planning:
- Roth IRAs work better than traditional IRAs for trust beneficiaries
- No required distributions means more control over timing
- Tax-free growth continues for up to 10 years after inheritance
Working with our team at Echelon Financial
Our conversion planning process
Discovery phase (Month 1):
- Complete tax return analysis (last 3 years)
- Investment account review and asset allocation
- Retirement income projection modeling
- Estate planning document review
- Medicare and Social Security optimization analysis
Strategy development (Month 2):
- 10-year conversion timeline creation
- Tax bracket and IRMAA threshold modeling
- Investment allocation recommendations for conversion funds
- Coordination with existing CPA and estate attorney
- Written conversion plan with annual targets
Implementation (Ongoing):
- Quarterly income monitoring and adjustment
- Conversion execution with optimal timing
- Tax withholding coordination
- Annual plan updates based on law changes and life events
- Performance tracking and reporting
Echelon Financial Service Comparison
| Service Level | Best For | What’s Included | Investment Minimum |
|---|---|---|---|
| Conversion Planning Only | DIY investors with existing advisors | Strategy development, annual updates, CPA coordination | $2M+ IRA assets |
| Comprehensive Wealth Management | Full-service clients | Complete financial planning, investment management, tax prep | $5M+ total assets |
| Family Office Services | Multi-generational wealth | Estate planning, trust services, family governance | $25M+ total assets |
Typical Client Profile & Outcomes
| Client Type | Starting Assets | Conversion Timeline | Typical Annual Conversion | Projected Tax Savings |
|---|---|---|---|---|
| Early retirees (62-65) | $2-5M traditional IRA | 5-8 years | $200K-400K | $300K-800K |
| Business sale recipients | $5-15M mixed assets | 2-4 years | $500K-1M | $500K-2M |
| Pension recipients | $1-3M traditional IRA | 8-12 years | $100K-250K | $200K-600K |
| Widow/widower planning | $3-8M mixed assets | 3-5 years | $300K-600K | $400K-1.2M |
Success metrics: 95% of our conversion clients stay within their target tax brackets while achieving projected savings.
Typical Client Profile & Outcomes
Your conversion planning checklist
Before you start any conversions:
✓ Complete tax projection modeling
- Project income for next 10 years
- Identify optimal conversion windows
- Calculate bracket room and IRMAA impacts
✓ Establish tax payment strategy
- Verify adequate non-IRA liquidity
- Set up estimated payment system if needed
- Coordinate with CPA on withholding strategies
✓ Review investment allocation
- Ensure growth-oriented investments in Roth
- Position income-producing assets appropriately
- Plan for conversion timing around market conditions
✓ Update estate planning documents
- Review beneficiary designations
- Consider impact on trust planning
- Coordinate with attorney on inheritance strategy
During active conversion years:
✓ Monitor income quarterly
- Track actual vs. projected income
- Adjust conversion amounts based on reality
- Watch for unexpected capital gains distributions
✓ Execute conversions in tranches
- Spread conversions throughout the year
- Take advantage of market volatility
- Maintain flexibility for year-end optimization
✓ Coordinate charitable giving
- Time large gifts with large conversions
- Use QCDs to manage RMD/conversion coordination
- Consider donor-advised fund strategies
Annual review requirements:
✓ Update projections each fall
- Refresh income estimates
- Check Medicare threshold proximity
- Confirm investment performance impacts
✓ Plan following year’s strategy
- Set next year’s conversion targets
- Coordinate with other tax planning
- Schedule implementation timeline
The bottom line on tactical Roth conversions
After helping hundreds of Austin families navigate Roth conversions, here’s what I want you to remember:
The 2025-2028 window is real. The combination of current tax rates, new RMD rules, and Medicare planning creates an opportunity that may not repeat. But opportunity without strategy leads to expensive mistakes.
Conversions aren’t all-or-nothing. You don’t need to convert everything, and you don’t need to rush. The families who benefit most take a systematic approach over multiple years.
Tax savings are just the beginning. Yes, good conversion planning can save six figures in lifetime taxes. But the real benefit is flexibility – giving you and your heirs more control over your financial future.
Implementation matters more than perfection. I’ve seen families spend two years trying to optimize their conversion strategy and miss the entire opportunity. Sometimes good execution of a solid plan beats perfect analysis with no action.
Your next steps
If you’re sitting on substantial traditional IRA assets and this resonates with your situation, don’t wait until December to start planning. Good conversion strategies require time to model
