Timing Your Roth Conversions (So You Don’t Botch It): Real-Life Case Studies & Playbooks

Why timing matters more than hype

Roth conversions trade a tax bill today for tax-free growth later. The “win” depends on when you convert, which bracket you fill, how conversions interact with Social Security, Medicare IRMAA, state rules, and your future RMDs. Use the case studies below as templates, then follow the step-by-step playbooks at the end.

Case Study 1: Barry (62, single; NY). Converting now vs. post-retirement

Snapshot:

• Roth IRAs: $450k | Traditional (rollover) IRA: $400k | After-tax: $100k
• Salary ~$135k + pension ~$50k (light COLA) through 2026; plans to retire end of 2026
• Social Security at 70 ≈ $50k
• Converting ~$20k/yr now; spending target ~$60k/yr in retirement
• NY: no state tax on the first $20k of IRA distributions after 59½ (verify whether conversions count as “distributions” under NY rules before relying on this edge)

Strategy takeaway:

• With salary + pension, Barry sits in a higher combined bracket while working. Her biggest arbitrage likely begins after the paycheck stops.
• If retiring Dec-2026, prime conversion window likely 2027–2031 (pre-RMD, pre-SS or before SS fully ramps).
• Aim to “fill” a target bracket (often the federal 22%/24% band for singles) without tripping IRMAA tiers.
• Goal: shrink future RMDs so ongoing pension + SS + RMDs don’t push her into higher brackets and IRMAA later.
• Bonus NY nuance: If NY’s $20k exclusion applies only to distributions—not conversions—prioritize getting future RMDs under $20k to maximize that state exclusion once RMDs begin.

Barry’s quick plan: Pause or keep conversions modest through 2026; accelerate in 2027+ up to a pre-set AGI/IRMAA ceiling. Model yearly to keep Medicare premiums in check.

Case Study 2: “Jerry & Elaine” (mid-50s; retire in ~6 years)

Snapshot:

• Income ~$300k; spend ~$120k; tax-deferred ~$1.9M; Roth ~$150k; cash ~$150k
• Saving $40k to 401(k) + $40k to taxable; mortgage 2.75%; combined SS at ~70 ≈ $8,500/mo
• One spouse plans to work to 65 for health insurance

Strategy takeaway:

• At their age, $1.9M tax-deferred could double once or even twice before RMD age—future RMDs could be very large.
• This is a textbook case for consistent annual conversions now and especially after the first spouse retires (income dips).
• Use taxable savings to pay the tax so more ends up in Roth.
• Keep saving, but consider diverting a bit of current savings to taxes on conversions if future RMD math looks ugly.
• Guardrails: don’t push into much higher brackets or IRMAA tiers unless modeling shows clear lifetime benefit.

Case Study 3: Alex (31, software engineer). All-at-once vs. phased conversion

Snapshot:

• Income ~$150k; retirement ~$250k (⅓ Roth, ⅔ pre-tax); pre-tax IRA ~$57k
• Goal: ~50/50 tax diversification; employer contributes 8%

Strategy takeaway:

• Pure math may favor converting the entire $57k now while in a moderate bracket, especially with expected rising income and decades of growth ahead.
• Real-life cash flow matters: a one-year $20k(±) tax bill can sting. A 2–3 year phased set of conversions keeps him in target brackets and preserves lifestyle cash.
• Keep maxing Roth workplace plan; once balances feel “balanced,” add taxable investing for flexibility.

Career pivot tip: Want into planning? Start CFP® coursework now (can do while working), meet fee-only RIAs, and target an entry role (client service → paraplanner → planner). Ethics + mentorship + process > sales quotas.

Case Study 4: Mike (58½; married). Running out of runway?

Snapshot:

• Tax-deferred ~$2.6M; Roth ~$750k; taxable ~$850k
• Converting ~$50k/yr; worries about getting “enough” moved before RMDs

Strategy takeaway:

• With ~17 years to first RMDs (age 75 under current law), $2.6M can compound dramatically.
• Yes—keep converting annually to a bracket ceiling while avoiding avoidable IRMAA jumps.
• Don’t usually withhold conversion tax from the IRA; use taxable cash where possible so every converted dollar lands in Roth.
• Early distributions before RMDs (to spend) can also reduce future RMDs. The right mix is: spend some from pre-tax + convert some each year, both to smooth lifetime brackets.

Rare exception: If you have huge tax-deferred balances, minimal taxable cash, and today’s bracket is far lower than future projected, using a small portion of the IRA to pay conversion tax can pencil out. That’s rare—model it.

Case Study 5: Lisa (60). Did conversions “lock up” her old Roth contributions?

Snapshot:

• Old Roth IRA ~$50k (incl. ~$10k contributions 20+ years ago)
• Recent Roth conversions: $42k each of the last 2 years
• Wants cash now; worries a withdrawal over $10k is taxable

Clarifier:

• Roth ordering rules: contributions come out first (always tax- and penalty-free), then conversions (principal next), then earnings.
• Two clocks:
  1. Roth IRA 5-year clock for tax-free earnings: you need any Roth open ≥5 tax years and be 59½+ (Lisa checks both).
  2. Conversion 5-year clocks prevent penalties on early access to conversion principal only if you are under 59½. Lisa is 60, so no penalty.
• Bottom line: Lisa can withdraw from her Roth tax- and penalty-free now. Conversions didn’t “poison” the old contribution access.

Quick hits & clarifications

• Age+20 contribution rule of thumb: Cute, but inferior to real planning. Base Roth vs. traditional contributions on today’s bracket vs. modeled future bracket/RMDs, IRMAA exposure, state taxes, and time horizon.
• NY $20k exclusion (age 59½+): Often applies to distributions from qualified plans/IRAs. Some states treat conversions differently than distributions—confirm before counting on it.
• Rental income & Roth 401(k): Rental income is generally passive, not “earned.” You need earned income (wages or self-employment subject to FICA/SE tax) to contribute to IRAs/solo 401(k)s.

Your Roth Conversion Playbook (works for most households)

1. Map your income runway (by year): Work pay → gap years → SS/pension → RMDs. Identify low-income years for bigger conversions.
2. Pick a bracket “ceiling”: Common targets: fill up the 22%/24% band (or the top of your chosen bracket) without tripping IRMAA tiers unless the lifetime tax win justifies it.
3. Mind IRMAA: Medicare premiums are based on your two-year-lag MAGI. Know the tier thresholds and model your AGI each conversion year. Use SSA-44 to appeal for life-changing events (e.g., retirement).
4. Pay taxes from taxable money: Maximizes what lands in Roth. Only consider withholding from the IRA in unusual, well-modeled cases.
5. Sequence smartly: Spend some pre-tax (especially in gap years) and convert some each year to smooth lifetime taxes and shrink RMDs.
6. Respect the clocks: After 59½, conversion 5-year penalties go away; the tax-free earnings 5-year clock is satisfied once any Roth is 5 tax years old.
7. Re-run annually: Markets, brackets, IRMAA, and life change. Update the plan yearly.

Bottom line

• Barry: Let the big push start after the paycheck ends (2027+), manage to a bracket/IRMAA ceiling, and aim to keep future RMDs under NY’s state exclusion threshold if possible.
• Jerry & Elaine: Start/continue annual conversions now and post-retirement—classic case for aggressive but bracket-aware Roth building.
• Alex: All-at-once works on paper; phased may fit cash flow. Either way, you’re early—huge advantage.
• Mike: You have runway—use it. Convert to a ceiling yearly; pay taxes from taxable; consider spending some pre-tax to flatten future RMDs.
• Lisa: You’re free to withdraw from the Roth tax- and penalty-free at 60; conversions didn’t “lock” the old contributions.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.