Retirement Tax Planning: Roth Conversions, RMDs, Social Security, and the IRMAA Trap

Use traditional (pre-tax) accounts when your tax rate today is higher than it will be when you withdraw, and Roth accounts when your rate today is lower. The deduction now versus tax-free growth later is the core trade-off, and many savers benefit from holding both to create flexibility in retirement.

A few facts tilt the decision. Roth IRAs have no required minimum distributions during the owner’s lifetime, so they keep growing tax-free and pass to heirs income-tax-free. Younger savers in low brackets usually favor Roth; peak earners in the 32% to 37% brackets usually favor the pre-tax deduction now and a conversion later.

State tax matters too. Contributing pre-tax while working in a high-tax state and withdrawing after moving to a no-income-tax state captures the deduction at a high rate and the withdrawal at a low one. Holding both account types is what gives you the dials to manage your bracket year by year in retirement.

A backdoor Roth lets high earners above the income limit fund a Roth IRA by making a nondeductible traditional IRA contribution and then converting it to Roth. A mega backdoor Roth goes much further: it uses after-tax contributions to a 401(k), up to the overall plan addition limit ($72,000 in 2026, indexed annually), then converts them to Roth.

Both strategies are legitimate and widely used, but each has a trap. The backdoor Roth is undermined by the pro-rata rule if you hold other pre-tax IRA money, and the mega backdoor only works if your 401(k) plan actually allows both after-tax contributions and in-plan Roth conversions or in-service rollovers.

A Roth conversion makes sense when you can move pre-tax money into a Roth at a lower tax rate than you would pay on it later. The classic window is the low-income years after retiring but before Social Security and required minimum distributions push your income back up.

The mechanics matter. Convert just enough to fill the top of a target bracket (often 12%, 22%, or 24%), pay the conversion tax from outside funds so the whole balance moves to Roth, and stop short of thresholds you want to avoid, including IRMAA tiers and the Affordable Care Act premium cliff. Each conversion also starts its own five-year clock for penalty-free access to the converted amount.

Done across several years, partial conversions smooth a large pre-tax balance into Roth before RMDs force it out at higher rates, and they shrink the future RMDs themselves. The goal is to never let any single year spike into a high bracket.

Required minimum distributions (RMDs) are mandatory annual withdrawals from pre-tax retirement accounts that begin at age 73 for those born between 1951 and 1959, and age 75 for those born in 1960 or later. The amount is your prior year-end balance divided by an IRS life-expectancy factor.

SECURE 2.0 cut the penalty for a missed RMD from 50% to 25% of the shortfall, and to 10% if you correct it within a short window. Roth IRAs have no RMDs during the owner’s lifetime. Your first RMD can be deferred to April 1 of the year after you reach RMD age, but that doubles up two distributions into one tax year.

Inherited accounts follow different rules. Under the SECURE Act, most non-spouse beneficiaries must empty an inherited IRA within 10 years, and many must also take annual distributions during that window, so beneficiary planning is its own analysis.

A qualified charitable distribution lets someone age 70½ or older give directly from an IRA to a qualified charity, up to an annual limit (around $108,000 in 2025, indexed annually). The amount is excluded from income and can count toward your required minimum distribution.

Excluding the gift from income is usually better than taking the distribution and deducting the donation, because a lower adjusted gross income also reduces the share of Social Security that is taxed and can keep you under IRMAA thresholds. It works even if you do not itemize, which most retirees no longer do.

The transfer must go directly from the IRA custodian to the charity to qualify. Used well, a QCD satisfies the RMD, supports causes you care about, and lowers your AGI all at once.

Up to 85% of Social Security benefits are subject to federal income tax depending on your provisional income, and for most middle and higher income retirees there is no level at which benefits become fully tax-free. Provisional income is roughly your adjusted gross income plus tax-exempt interest plus half of your benefits.

IRMAA is a separate surcharge added to Medicare Part B and Part D premiums when your modified adjusted gross income exceeds set thresholds. It is based on your tax return from two years earlier, so a one-time income spike at 63, such as a large Roth conversion or capital gain, can raise your Medicare premiums at 65.

Because both Social Security taxation and IRMAA are driven by the same income figures, a conversion or a big gain ripples into both. You can request an IRMAA reduction with Form SSA-44 after a life-changing event such as retirement, but a planned income spike is not a qualifying event, so it has to be managed in advance.

A tax-efficient drawdown generally spends taxable brokerage accounts first, then tax-deferred accounts (traditional IRA and 401(k)), and Roth accounts last, while using Roth conversions in the low-income years to smooth the tax-deferred balance before RMDs force it out. The aim is to avoid a spike in any single year.

Asset location supports this: hold tax-inefficient assets like bonds and REITs inside tax-deferred accounts, and tax-efficient stock index funds in taxable accounts where they also get a step-up in basis at death. Leaving Roth dollars for last, and for heirs, is powerful because Roth has no RMD for the owner and passes income-tax-free.

For charitably inclined retirees, layering qualified charitable distributions on top of this order lowers AGI while meeting RMDs. The whole plan is a multi-year sequence, not a single decision, and it should be revisited as brackets, balances, and goals change.