My wife and I are 70 years old. We paid off everything, including the house. Between my $29,000 pension and Social Security, we get $99,000 gross per year in income, which is more than enough. Our current savings in our brokerage account is $700,000. Our individual retirement account (IRA) totals $1.4 million. Our Roth is worth $400,000. We both expect to live to be 90 years old. At our age, is it too late to have a Roth conversation?
-Anonymously
The short answer is no. There is no age limit on your ability to convert to a Roth.
There is also no income requirement to convert to a Roth. As long as you have a balance in an IRA, you can theoretically continue converting to a Roth for as long as you like.
The bigger question is this: Does converting to a Roth advance your wealth inheritance goals?
This should be the starting point before beginning a Roth conversion strategy, regardless of your age. But it becomes especially important when you’re considering Roth conversions as you approach and begin taking required minimum distributions (RMDs).
Most articles and conversations about converting to a Roth will focus on the years between retirement and taking RMDs. Those years can provide a fantastic opportunity to convert IRA dollars into a Roth. But they are not your only chance. Answer this question: What do I want to happen to my assets when I die? The answer is in the details. Here’s how to think through this strategy.
A financial advisor can help you understand how to manage the tax consequences of a Roth conversion.
An argument against a Roth conversion
Ask an advisor: Is it too late to switch to a Roth?
On one end of the spectrum, let’s assume that all your wealth is given to your favorite charity when you die. If a qualified charity receives your IRA when you die, no taxes are due and you should strongly consider not converting any of your IRA balance to a Roth during your lifetime.
In that case, converting to a Roth would opt out of paying taxes you would otherwise never have to pay.
The other extreme would be if your goal is to leave all your wealth to your children, grandchildren, or other loved ones – and ensure that they never have to worry about paying taxes on those dollars.
In this case, an argument could be made for trying to convert every last dollar of your IRA balance into a Roth before you die. That way, your beneficiaries receive a huge tax-free pie, and the IRS doesn’t get to share a single piece. This may not provide the most tax savings, but it would be the best way to ensure that your beneficiaries don’t have to worry about taxes.
The middle ground on Roth conversions
Ask an advisor: We’re 70 years old, have a retirement income of $99,000, a $1.4 million IRA, and other investments. Is it ever too late to switch to a Roth?
Most people will end up somewhere in between, where converting to a Roth can make a lot of sense, but only up to a point.
Roth conversions make the most sense if you can choose to pay income taxes on your IRA balance and move it to a Roth in a relatively low income tax year. “Relative” is an important word here because it will be unique to each taxpayer’s situation.
The question to ask yourself here is: Am I afraid that at some point in the future I will end up in a higher tax bracket than I am now?
Consider using this free tool to match with a financial advisor for professional guidance on your Roth conversion.
Roth Conversion Factors to Understand
If you decide that a Roth conversion will help you achieve your wealth goals, there are several factors to consider when deciding how much to convert in a given year. They are:
How much income tax will be due
In general, the more we can spread taxable income, the lower the federal income tax we will pay. That is too much of a simplification. But it provides a starting point for thinking about how to put together a Roth conversion strategy.
In the example given in this question, converting the entire $1.4 million from an IRA to a Roth in one year would result in more taxes paid than spreading those conversions over the taxpayers’ remaining life expectancy.
Federal income taxes get all the attention when Roth conversions are involved. But your marginal tax rate (the amount of tax you pay on the next dollar of income) is hardly the only consideration.
In this example, 85% of the taxpayer’s Social Security benefit (the highest possible amount) is already included in taxable income. But for taxpayers with lower taxable incomes, Roth conversions have the potential to change how much Social Security is taxable.
Increasing taxable income can also change a taxpayer’s eligibility for tax credits and deductions. For taxpayers who have not yet started claiming Medicare, the premium tax credit could be particularly impactful.
Medicare premiums
For taxpayers who are approaching age 65 or already on Medicare, it is critical to remember that the amount you pay for your Medicare is affected by your taxable income (particularly through modified adjusted gross income) and the can increase actual costs of performing a Roth conversion.
This can be particularly dangerous because each income group is treated as a cliff for Medicare premiums. So once you’re one dollar above the threshold, your premiums make the full jump to the next level. In other words: in for a penny, in for a pound.
What if the tax rules change in the future?
I’m often asked if I’m concerned that Congress will change the Roth rules in the future and having large Roth balances could prove to be a liability.
My answer is always the same: the tax code is written in pencil and Congress can change anything it wants. We must do the best we can with the information we have and the laws currently in place.
A financial advisor can help you navigate changes in legislation, including the planned sunset of provisions of the Tax Cuts and Jobs Act in 2026.
What to do now
My crystal ball is still broken, so anything I say about future rule changes would just be a guess. What I do know is that holding an IRA is like having an adjustable rate mortgage with the IRS, where they have the ability to change the interest rate to whatever they want, whenever they want. An option to take the IRS out of the picture by converting IRA dollars to Roth dollars is always worth considering.
Steven Jarvis, CPA, is a financial planning columnist at SmartAsset, answering reader questions about personal finance and tax topics. Do you have a question that you would like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Steven is not a participant in the SmartAdvisor Match platform and has received compensation for this article. The author’s taxpayer resources can be found at pensionetaxpodcast.com. Resources for the author’s financial advisors are available at pensionetaxservices.com.
Find a financial advisor
If you have questions specifically related to your investment and pension situation, a financial advisor can help you. Finding a financial advisor does not have to be difficult. SmartAsset’s free tool matches you with up to three vetted financial advisors serving your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Planning for retirement? Use SmartAsset’s Social Security Calculator to get an idea of what your benefits might look like in retirement.
Have an emergency fund on hand in case you encounter unexpected expenses. An emergency fund should be liquid – in an account that is not at risk of significant fluctuations like the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. But with a high-interest account, you can earn compound interest. Compare savings accounts from these banks.
Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and provides marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.
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