Retirees Have an 11-Year Window for Low‑Cost Roth Conversions, Yet Most Convert Nothing

Overview

• Before required minimum distributions start at age 73, retirees typically have about an 11-year period when their income is low enough to make Roth conversions at the 12% federal rate feasible.

• Yet the typical retiree converts nothing during this window, mainly because setting aside cash to pay the conversion tax is difficult when personal savings hover around 3.9%.

• Financial expert Suze Orman recommends making modest annual conversions that stay within the 12% or 22% tax brackets, covering the tax bill from a taxable brokerage account instead of the IRA.

From the moment someone retires until RMDs begin at age 73 under SECURE 2.0, most households experience roughly an 11-year span where taxable income falls sharply. Paychecks cease, and Social Security alongside modest withdrawals from investments become the primary income sources. For many, this places them in the 12% or 22% federal tax bracket for the first time in years—a period that represents the lowest tax burden they will ever face. Despite this advantage, the average retiree converts $0 of their traditional IRA to a Roth during this window.

How the Tax Code Creates This Opportunity

The calculation is simple. In 2026, a married couple filing jointly remains in the 12% tax bracket for taxable income up to $100,800 and in the 22% bracket up to $211,400. The standard deduction amounts to $32,200 for joint filers and $16,100 for singles. A retiree living on Social Security and a modest pension can convert a portion of their traditional IRA each year while staying below the 22% threshold. Once required minimum distributions begin, the IRA is taxed according to the government’s timetable rather than the retiree’s.

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The amounts involved are significant. According to Fidelity’s Q3 2025 analysis, the average IRA balance for baby boomers is $257,002, while Gen X averages $103,952. If left untouched, these balances continue to grow in a traditional IRA and are eventually withdrawn as ordinary income during a retiree’s seventies and eighties—often at tax rates higher than those available in the conversion window.

Why Most Retirees Avoid the Conversion

The tax advantage is genuine, yet retiree behavior paints a different picture. Personal savings have dropped to 3.9% of disposable income as of Q1 2026, down from a peak of 6.2% in Q1 2024. While per‑capita disposable income has risen to $68,391, most households are spending the extra income rather than saving it. Average annual expenditures climbed to $78,535 in 2024, up from $72,973 in 2022.

Executing a Roth conversion requires cash to cover the tax bill—a resource many households lack. Using IRA funds to pay the tax undermines the strategy, particularly for those under 59½, and reduces the investment base even for older retirees. The 2.8% Social Security cost‑of‑living adjustment for 2026 does not create meaningful breathing room in a fixed‑income budget.

Consumer sentiment adds to this hesitation. The LSEG/Ipsos Primary Consumer Sentiment Index stood at 49.6 in May 2026, indicating stability but caution. With the 10‑year Treasury yielding 4.49% and the effective federal funds rate at 3.63%, retirees often prefer to hold cash rather than write a check to the IRS to fund a conversion.

The Price of Inaction

The window ends quietly. When required minimum distributions begin at age 73, they add to Social Security, pension income, and any part‑time work, frequently pushing retirees back into the 22% or 24% tax bracket for the remainder of their lives. Surviving spouses encounter an even steeper rise, as filing status shifts from joint to single, halving the bracket thresholds. Funds that could have been shifted at a 12% rate are instead taxed at 24% or higher, and heirs who inherit a traditional IRA must withdraw the balance within ten years, often during their own peak‑earning years and at elevated tax rates.

Inflation offers little relief. The consumer price index was rising at just 1.6% year‑over‑year in May 2026, below the Federal Reserve’s 2% goal, meaning tax‑bracket adjustments will advance slowly. Consequently, the existing bracket structure will remain largely unchanged for retirees over the coming years.

What the Data Suggest

Retirees who do take advantage of the window tend to share three habits. They size their conversions to fill a particular tax bracket, usually stopping at the top of the 12% or 22% bracket. As financial educator Suze Orman explains, converting the entire balance at once would trigger a large ordinary‑income tax bill in that year, so incremental conversions are preferable. They pay the associated tax from a taxable brokerage account rather than from the IRA, and they often time conversions during market downturns, which reduces the dollar amount of the conversion for a given number of shares. Orman sums it up: ‘When markets are falling, your portfolio value drops, making it an ideal moment to convert.’

The window exists because of how the tax code aligns with a typical retirement path. The data reveal that most households complete those 11 years exactly as they began—leaving the traditional IRA untouched and postponing the tax liability to a future self who will encounter higher tax brackets, mandatory withdrawals, and fewer planning options.

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