Roth Conversion Strategy for Retirees Ages 60–72: A Step-by-Step Checklist

The Core Idea

A Roth conversion moves money from a pre-tax retirement account — a traditional IRA, a 401(k), a 403(b), or similar — into a Roth IRA. The amount you convert is added to your ordinary taxable income for that year, and you pay federal (and usually state) income tax on it. In return, every dollar inside the Roth IRA grows tax-free from that point forward, and qualified withdrawals in retirement are never taxed again.

That's the trade: a tax bill today in exchange for tax freedom tomorrow. Whether that trade is favorable depends entirely on the rate you pay now versus the rate you would have paid later — and on how long the money has to compound before you need it.

What Accounts Can Be Converted?

Almost any pre-tax retirement account qualifies for conversion to a Roth IRA. This includes:

• Traditional IRAs (deductible or non-deductible)
• Rollover IRAs (funded from old 401(k) plans)
• SEP IRAs and SIMPLE IRAs (after the required 2-year SIMPLE IRA holding period)
• 401(k), 403(b), and 457(b) plans — typically after leaving employment or through in-plan Roth conversion if the plan allows

There is no income limit and no dollar cap on how much you convert in a single year. You can convert $1,000 or $1,000,000 — though the tax consequences scale accordingly.

How the Tax Works

The converted amount is treated as ordinary income, just like wages or pension income. It is not subject to capital gains rates, and it does not receive any preferential treatment. If you convert $50,000 in a year when your other income puts you in the 22% federal bracket, that $50,000 is taxed at 22% — a bill of $11,000 before state taxes.

If you have made non-deductible (after-tax) contributions to a traditional IRA, those dollars are not taxed again when converted. The IRS pro-rata rule requires you to calculate the taxable fraction of any conversion based on the ratio of pre-tax to after-tax funds across all your IRAs combined.

The Roth IRA Five-Year Rule

Converted funds come with a five-year clock. If you withdraw the converted principal before five years have passed since the conversion — and before age 59½ — you owe a 10% early withdrawal penalty on those funds. Once you are 59½ or older, this penalty disappears entirely. Earnings inside the Roth IRA require both the five-year clock and age 59½ to be fully tax-free.

For most retirees doing conversions in their 60s, this rule is rarely a practical concern. But for anyone under 59½ who plans to access converted funds relatively soon, the five-year rule matters.

No Required Minimum Distributions

One of the most underappreciated benefits of a Roth IRA is that it is the only retirement account with no Required Minimum Distributions (RMDs) during the original owner's lifetime. Traditional IRAs force you to start withdrawing at age 73 — and pay tax on every dollar. Roth IRAs can sit untouched indefinitely, compounding tax-free for decades.

This distinction has enormous implications for retirees who don't need the money immediately and for those planning to leave wealth to heirs.

Paying the Tax Bill the Right Way

When you execute a Roth conversion, resist the temptation to have taxes withheld from the converted amount itself. Doing so reduces the principal that enters the Roth IRA and — if you are under 59½ — can trigger the early withdrawal penalty on the withheld portion. The far better approach is to pay the tax bill from a taxable savings or brokerage account. This preserves the full converted amount inside the Roth, maximizing the long-term compounding benefit.

Is a Roth Conversion Right for You?

Roth conversions make the most sense when your current marginal tax rate is lower than your expected future rate. Key situations where conversions tend to be favorable include:

• Early retirement years before Social Security and RMDs begin (low-income window)
• Years with large deductions that offset conversion income
• Years following a market downturn, when account values are temporarily depressed
• The period before the TCJA rate cuts are set to expire

Conversions are generally less attractive if you are currently in a high bracket and expect your income to drop significantly in retirement, or if you need the converted funds soon and cannot benefit from years of tax-free growth.