Roth Conversions Before Retirement: Why the 5 Years Before You Retire Matter Most

Written By Christopher Swan, CFP®, MBA

The 5 years before retirement are the most valuable tax planning window you’ll ever have. Here’s why.

Most people don’t think about Roth conversions until they’re already retired. By then, the window has narrowed. The golden years of tax planning happen while you’re still working — specifically, in the years just before and just after your last paycheck. If you’re within five years of retirement, this post is for you.

What a Roth Conversion Actually Is (Plain English)

A Roth conversion is simple in concept. You take money from a traditional IRA or 401(k) — where it’s been growing tax-deferred — and move it into a Roth IRA. When you do this, you pay income tax on the amount you convert. In exchange, that money grows tax-free from that point forward, and qualified withdrawals in retirement are completely tax-free.

Think of it this way: your traditional retirement accounts are a partnership with the IRS. Every dollar in there, the IRS owns a piece of. A Roth conversion is buying out the IRS’s share — at today’s rates, before future tax rates potentially go up.

The “Golden Window” Between Your Last Paycheck and Age 72

Here’s where timing matters enormously. When you’re working and earning a salary, your income is high. Your tax bracket is high. Converting in those years means paying a bigger tax bill on the conversion.

But the moment you stop earning a paycheck — and before Required Minimum Distributions kick in at age 73 — there’s often a gap where your taxable income drops significantly. Maybe you’re living off savings or a spouse’s income. Maybe you’ve retired at 60 and won’t start Social Security until 67.

That gap is the golden window. Your taxable income is lower, which means you can convert chunks of your traditional IRA into a Roth at a lower tax rate than you’d pay later. Every dollar you convert during this window is a dollar that won’t be subject to RMDs, won’t increase your Medicare premiums, and won’t push your Social Security into taxation.

This window closes when RMDs begin. Once the IRS forces you to take distributions, your taxable income goes back up, and the conversion math becomes less favorable.

Why Texas Residents Have a Unique Roth Advantage

Living in Texas means no state income tax. That’s not just a lifestyle benefit — it’s a Roth conversion advantage.

When a retiree in California converts $50,000 from a traditional IRA to a Roth, they pay federal tax plus up to 13.3% in state income tax. A Texas resident doing the same conversion pays federal tax only. That’s a significant discount on every dollar converted.

If you live in Texas and haven’t explored Roth conversions, you’re leaving money on the table. The state tax savings compound over every year of conversion, and over a retirement that could last 25 to 30 years, that adds up to real money.

How Much Should You Convert Each Year?

This is where the planning gets precise. The goal isn’t to convert everything at once — that would spike your income and push you into a higher bracket, defeating the purpose.

The strategy is to convert just enough each year to “fill up” your current tax bracket without spilling into the next one. If you’re in the 22% bracket and have room before hitting the 24% bracket, you convert up to that ceiling. Then you do it again next year.

This bracket management approach — converting strategically over several years — can save tens of thousands or even six figures in lifetime taxes compared to doing nothing and letting RMDs dictate your withdrawals.

The right amount depends on your other income, your filing status, your projected future brackets, and how much you have in traditional accounts. This is not a one-size-fits-all decision.

The Spreadsheet Matters More Than the Strategy

I run detailed projections for every client exploring Roth conversions. We model the tax impact year by year, account for Social Security timing, Medicare premium thresholds, and the long-term growth differential between leaving money in a traditional account versus moving it to a Roth.

The math usually tells a clear story. And in most cases, clients who are within five years of retirement have a meaningful opportunity they didn’t know existed.

The best tax strategies aren’t exciting. They’re boring, methodical, and precise. But done well, they can save a family six figures in lifetime taxes. That’s worth the spreadsheet.

Christopher Swan, CFP®, MBA is the founder of Retire With Swan, a financial planning practice in Northlake, TX (DFW) specializing in retirement income planning and tax strategy for pre-retirees and retirees. Ready to explore your Roth conversion window? Book a complimentary Swan Fit Call at retirewithswan.com.