The Roth Conversion Window: Why the 5 Years Before Retirement Are Critical

For many pre-retirees, the five years leading up to retirement represent a unique and fleeting opportunity. During this period, your income may still be relatively high, but you have the chance to strategically convert traditional IRA and 401(k) assets into Roth accounts — potentially saving six figures in lifetime taxes.

A Roth conversion involves moving money from a pre-tax retirement account (like a traditional IRA) into a Roth IRA. You pay ordinary income tax on the pre-tax amount you convert now; after that, growth can come out tax-free as a qualified distribution (generally after age 59½ and once your first Roth IRA has been open five tax years). The key question is: will your tax rate be higher now or in retirement?

For many people approaching retirement, the answer is nuanced. While your earned income may drop after you stop working, Required Minimum Distributions (RMDs), Social Security benefits, and investment income can push you into higher tax brackets than you expect. The One Big Beautiful Bill Act (July 2025) made the current federal brackets (10% to 37%) permanent, so the bigger risk for most retirees isn’t a scheduled rate increase — it’s RMDs, taxable Social Security, and a surviving spouse moving to the single-filer brackets. Congress can still change rates in the future.

The ideal conversion strategy involves converting just enough each year to “fill up” your current tax bracket without pushing you into the next one. For example, if you’re in the 24% bracket and have $40,000 of room before the 32% bracket begins, you might convert exactly $40,000. Over five years, that’s $200,000 moved to tax-free status at a known, manageable rate. (A hypothetical for illustration; actual bracket room depends on your income and filing status.)

Timing matters enormously. Once you begin taking Social Security or RMDs, your taxable income floor rises, making conversions more expensive. The window between your peak earning years and the start of mandatory distributions is often the sweet spot.

There are several important considerations. First, you need sufficient non-retirement funds to pay the tax bill — paying conversion taxes from the converted amount itself defeats much of the purpose. Second, two five-year rules apply: each conversion has its own five-year clock, and withdrawing converted dollars before it runs out (if you’re under 59½) can trigger the 10% additional tax; separately, earnings are tax-free only in a qualified distribution, which generally requires age 59½ and five tax years since your first Roth IRA contribution or conversion. Third, conversions can affect Medicare premiums through IRMAA surcharges, which look back two years — a 2026 conversion can raise 2028 premiums — so careful planning is essential.

At Authentikos Advisory, we model Roth conversion scenarios as part of our Balanced Obligations pillar within the Arbor Method™. We project your lifetime tax liability under multiple conversion strategies, factoring in Social Security timing, RMDs, state tax implications, and potential changes in tax law. The goal is to find the strategy that minimizes your total lifetime tax burden while maintaining the flexibility you need.

If you’re within five years of retirement and haven’t evaluated Roth conversions, now is the time. The window is finite, and once it closes, the opportunity cost can be substantial. Schedule a complimentary Clarity Call to discuss whether a Roth conversion strategy makes sense for your situation.