There are years when your tax rate dips — early retirement, a sabbatical, a slow business year. Those are the years to move money into a Roth, and most people let them pass.
A Roth conversion means moving money from a traditional IRA or 401(k) into a Roth account. You pay income tax on the amount you convert now — and in exchange, that money grows tax-free and comes out tax-free for the rest of your life. The entire game is timing: you want to convert in years when your tax rate is unusually low.
Where the low-rate years hide
- The gap between retiring and age 73. Once you stop working but before required minimum distributions begin, your income can fall dramatically — a multi-year window of low brackets.
- A down year in business. A slow year for your company is painful, but it can be the cheapest time you’ll ever have to convert.
- A sabbatical or career break. A year with little earned income can sit you in a much lower bracket than usual.
Why it matters so much
Traditional retirement accounts come with a hidden partner: the IRS owns a slice of every dollar, and you don’t find out the exact size until you withdraw. Worse, those accounts trigger required minimum distributions in your seventies, which can push you into higher brackets right when you don’t want them — and can raise the tax on your Social Security and your Medicare premiums along with it.
Convert while rates are low and brackets are empty. You’re voluntarily paying tax at 12% or 22% today to avoid paying 32% or more — on a much larger balance — later.
Filling the bracket, not overflowing it
The skill is converting just enough to fill up a low bracket without spilling into the next one. That takes a current-year projection — something we build before December so there’s still time to act. Done across several years, a series of partial conversions can quietly reshape your entire retirement tax picture.
If you have a traditional balance and a year coming up where your income will dip, don’t let it pass unexamined. That window doesn’t reopen.