[Stacy]

I know that it is possible to totally avoid Federal income tax if you convert from traditional to Roth in years where you make less than the standard deduction, but I don’t know that I’ll ever reach that low of an income because my business will continue to pay me income that is 95% passive.

And even if I did eventually get to less than the standard deduction amount, I don’t think converting $30,000 a year is fast enough to prevent me from eventually having to take out pretty huge RMDs.

If I don’t think I’ll ever reach that 0% bracket or I’m positioned to face really big RMDs, then I might as well convert the max amount I can that still keeps me within the lowest bracket I think I’ll be in (12% bracket) right?

[Frank]

Yes.
I would not make “not paying taxes” as a primary goal in life — that’s a really f-ed up priority, but something to be minimized AFTER you set real goals as to what you want to do with your money and when you plan on spending it.

If you did not spend money earlier in life and then have big RMDs in your 70s because of that, you screwed up on living your best life earlier.

[Scott]

Yes, it usually doesn’t make sense to convert at a higher bracket than what you expect to be in, but ‘filling’ that bracket is usually a sensible default position ie if you will be in the 12% or 22% bracket, use all of it when you convert (being mindful of stealth tax like IRMAA and NIIT).

If you are married you might need to think about ‘widow tax’ implications which might suggest it is worth doing a bit more, a math puzzle.

While like many nerds I have a big spreadsheet one thing with conversions is you get a clean slate January 1 every year.

So do in 2025 what makes sense to the you of January 2025, then the you of January 2026 can update and see where you are.

If you are converting over a number of years and, with 20/20 hindsight, one or two years you were ‘wrong’ (a bit high or a bit low) it’s not going to be catastrophic.

[Jule]

The RMD is not that much, it’s a small percentage of the pretax balance.

At 73, it’s less than 3.5%, and until you get to 94 years old, it’s less than 10% of the remaining balance.

There’s nothing huge about those percentages.

[Rick]

Yes.
My plan has been fill through 12% tax bracket. This gives an overall effective tax rate, filling standard deduction then 0 then 10 then 12%, of about 8%.

Versus almost 30% in my working years. Big win.

Bigger win when done during a market decline as it is almost like (or actually like) converting some more money at 0%.

Making it worthwhile to consider filling the 22% bracket as it is a big one and can really help with the rmd avoidance plan.

[Amy]

What bracket will the huge RMDs put you into? That should be your upper bound.

[Bill]

Rmds start at around 4%. If you aren’t spending 4% in your 70s, you need to start giving money away.

As for conversions, yes, it typically makes sense to fill up the 12% bracket with some sort of income.

The standard deduction is going to eventually get filled with SS for most people, so 12% is likely going to be the lowest you’ll be in.

[John]

I’ve been doing it very slowly for 4+ years and reaching near zero in taxes. Not absolute zero, but pretty close.

I’m 67, and selling a house this year which I think will bump me up to IRMAA in two years.

I’m pondering 2 strategies right now:

a) Since I will be IRMAA anyway due to sale of the house, go ahead & convert ALL the remaining T-IRA this year.

Like ripping off a bandaid, get it over with (this might push me up to an even HIGHER IRMAA in 2027.)

b) Don’t do any Roth conversion this year since I’m already getting capital gains from the house.

Resume conversions next year, keeping to a low tax bracket & continuing to avoid IRMAA until my conversions are done. Probably take another 5-6 years.

My investment advisor is mulling this over & is expected to give me his advice next week.

[Stephanie]

The goal isn’t to not pay taxes! The goal is to lower your lifetime taxes which is a challenge and you just have to do the best with the information you know in the moment to make that decision.

My yearly goal since I’m retired and not on ACA is to max out my 12% tax bracket with Roth conversions.

I likely could convert less and still be okay, but idk if I’ll get married (no magic ball, but after retiring I met another FI retiree so he could use my low tax brackets if we got married to lower OUR lifetime taxes).

I’m happy to pay 12% because that seems low, tax brackets could change in the future.

Keep in mind that you add your standard deduction to the tax bracket limits when deciding how much you can convert (and don’t forget to estimate all your yearly income including dividends).

Don’t pay taxes for Roth conversions out of your retirement account or you’ll pay a 10% early withdrawal penalty.

If you do decide you want to stay in the 0% tax bracket (even after all this information) and you have a taxable brokerage account, keep in mind that you can set up your cost basis for LT capital gains and the 0% tax bracket for that is around where the 12% bracket for ordinary income is…

[John]

It depends on your wealth and how much you need.

The more money you have, the more you will need to convert.

[Author]

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