Retired at 65 but not collecting Social Security yet? That gap could be your best shot at a low-tax Roth conversion — here's how to know if it's right for you.
Executive Summary
A Roth conversion at 65 can make sense if you're retired but haven't yet started Social Security or Required Minimum Distributions (RMDs). This gap often creates an "income valley" — a stretch of unusually low taxable income — where converting Traditional IRA or 401(k) dollars to a Roth IRA can be taxed at lower rates. That said, a Roth conversion isn't for everyone: if you have high lifestyle spending needs during these years, simply withdrawing from your Traditional accounts can achieve a similar tax benefit without the extra step of a conversion. The right answer depends on your income, tax bracket, health coverage, and long-term goals.
Turning 65 is a milestone that often comes with a unique financial planning window. If you've retired but haven't yet claimed Social Security and aren't yet subject to RMDs, you may be sitting in what financial planners call an "income valley" — and that valley is exactly when a Roth conversion tends to be most powerful. Understanding whether this strategy fits your situation requires looking at your tax brackets, your Traditional IRA or 401(k) balance, your Medicare premiums, and how much income you actually need to live on.
A Roth conversion is the process of moving money from a Traditional IRA or 401(k) into a Roth IRA. You pay ordinary income tax on the converted amount in the year of the conversion, but after that, the money grows tax-free and can be withdrawn tax-free in retirement, with no RMDs during your lifetime.
Age 65 matters because it often sits right in the middle of a low-income window. Many retirees delay Social Security until 67 or 70 to increase their monthly benefit, and RMDs from Traditional accounts don't begin until age 73+ (based on current law). Between retirement and those two income triggers, taxable income can drop significantly — sometimes low enough to fill up the 10%, 12%, or 22% federal tax brackets with converted Roth dollars instead of letting those brackets go unused.
An income valley is the multi-year period after you stop earning a paycheck but before Social Security, possibly pensions, and RMDs kick in. During this stretch, your taxable income can be lower than it's been in decades — and lower than it's likely to be once RMDs and Social Security are both flowing. Converting during the valley lets you "fill up" lower tax brackets deliberately, rather than letting Uncle Sam decide your bracket for you later through mandatory withdrawals.
This strategy is often referred to as bracket-filling. The goal isn't necessarily to avoid taxes altogether — it's to pay tax on those dollars now, at a known and often lower rate, instead of later, when RMDs, Social Security, and possibly higher future tax rates could push you into a higher bracket.
Required Minimum Distributions force you to withdraw — and pay tax on — a percentage of your Traditional account balance every year starting at age 73+, whether or not you need the money. The larger your Traditional IRA or 401(k) balance grows between now and then, the larger those forced withdrawals become, and the more likely they are to push you into a higher tax bracket, increase taxation of your Social Security benefits, or trigger higher Medicare premiums (IRMAA). A Roth conversion during your income valley shrinks the account that generates those future RMDs.
Yes. If your lifestyle needs are high in these early retirement years and you don't have much room left in your low tax brackets after covering living expenses, you're not necessarily missing out. Withdrawing directly from your Traditional IRA or 401(k) to fund your lifestyle produces a similar underlying benefit to a Roth conversion: both approaches use up space in the lower tax brackets, and both reduce the size of your Traditional account balance, which lowers your future RMDs.
The difference is what happens to the money. In a Roth conversion, the dollars stay invested and continue growing tax-free inside a Roth IRA. In a straightforward withdrawal, the dollars are spent. If you need the cash flow to live on, spending it from a Traditional account before RMDs begin is a perfectly reasonable strategy — and can be just as tax-efficient as converting, depending on your full financial picture.
Every household's answer is different. Some of the factors that go into this decision include:
Roth conversions are a powerful planning tool, but they aren't automatically the right move for every 65-year-old. If a conversion pushes you into a meaningfully higher tax bracket, triggers a large Medicare IRMAA surcharge, or you expect to be in a lower tax bracket for the rest of your life anyway, converting may cost you more than it saves. There's also no "undo" button — Roth conversions can no longer be reversed once completed. The right decision depends on modeling your specific income, account balances, and long-term tax picture, ideally with a fiduciary advisor who is required to act in your best interest.
At Oak Road Wealth Management, we're a fee-only fiduciary financial planning firm based in Lee's Summit, Missouri, and we work with clients across the country. Because we don't sell products or earn commissions, our only job is to help you evaluate whether — and how much — a Roth conversion makes sense in the context of your full financial life, including your tax bracket, Social Security timing, Medicare costs, and legacy goals.
It depends on your income level, tax bracket, and how long you have before RMDs and Social Security begin. Many 65-year-olds who are retired but not yet collecting Social Security are in a temporary low-income window that makes conversions attractive, but it's not a universal recommendation — it should be evaluated against your full tax and retirement picture.
It's the period after you stop working but before Social Security, pensions, and RMDs begin, when taxable income is often at its lowest point in retirement.
If you need the cash to cover living expenses, withdrawing from a Traditional account can provide a similar tax benefit to converting, since both use up low tax brackets and reduce future RMDs. Converting is generally more beneficial when you don't need to spend the money and want it to keep growing tax-free.
Under current law, RMDs generally begin at age 73+. Completing Roth conversions before RMDs start can reduce the size of future required withdrawals.
Yes. A large conversion can increase your Modified Adjusted Gross Income (MAGI), which may trigger higher Medicare Part B and Part D premiums (IRMAA) two years later.
No. Roth conversions can create a larger-than-necessary tax bill for people who don't need the extra tax diversification or who expect to remain in a low tax bracket permanently. A personalized analysis with a fiduciary advisor is the best way to know if it fits your situation.
This article is for educational purposes only and does not constitute personalized tax, legal, or investment advice. Please consult a qualified fiduciary financial advisor and/or tax professional before making decisions about Roth conversions or retirement account withdrawals.
Written by Andrew Matz, Financial Planner at Oak Road Wealth Management.
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