Approaching retirement, we naturally start thinking about things that may not have been front and center during the main portion of our careers.
In my role as a Certified Financial Fiduciary, I have identified five crucial areas of retirement planning:
-Investments
-Retirement Income
-Taxes
-Health Insurance
-Legacy Planning
Each of these areas can - and will, in future posts- be broken down into more specific components. Today, however, I want to focus on one tax strategy that could save you tens of thousands, hundreds of thousands, or even millions of dollars in taxes over your lifetime: Roth Conversions.
The Challenge with Tax-Deferred Accounts
Most of us are familiar with tax-deferred accounts like traditional IRAs, 401(k)s, and 403(b)s. The money we save in these accounts grows without being taxed until we withdraw it. However, what many people do not realize is that the Required Minimum Distribution (RMD) – the money you must withdraw from your IRA yearly, beginning at a certain point in time – is always on the horizon.
At age 73 or 75 (depending on your birth year), you must begin taking RMDs from your tax-deferred accounts—whether you want to or not. And here is the kicker: these distributions are taxable. Worse, they could push you into a higher tax bracket, resulting in significantly more taxes on income you may not have even needed or wanted at the time.
Underestimating the Impact of RMDs
The looming RMD often does not get the attention it deserves. Many people I have worked with either A) do not think about RMDs because they seem far off, or B) underestimate how large their RMDs will be.
Consider this example:
Let us assume someone born in 1965 has a tax-deferred balance of $1,000,000 today, and that balance grows at an average rate of 7% per year until age 73. (Note that 7% growth is an estimate and not guaranteed.)
At age 73, their first RMD would be nearly $91,000. By age 80, this distribution would increase to over $144,000! That’s a substantial amount, and it could push them into a higher tax bracket.
Enter Roth Conversions- A powerful tax strategy
One way to potentially reduce the impact of these looming RMDs—and avoid a tax “bomb” later—is through Roth conversions.
A Roth conversion involves moving money from a traditional tax-deferred account (like an IRA or 401(k)) to a tax-free Roth IRA. The trade-off? You will pay taxes on the amount you convert in the year it is moved.
But here is the silver lining: All the money in your Roth IRA grows and compounds tax-free. What is more, you and your spouse can withdraw funds from it tax-free during your lifetimes, and it is also tax-free for your beneficiaries.
When Should You Consider Roth Conversions?
While Roth conversions can be incredibly beneficial, timing is everything. Here are five great times to consider making a conversion:
1- Between retirement and RMDs. After retirement and before the RMDs kick in, your tax bracket might be significantly lower. This could be a good time to convert some of your tax-deferred funds to Roth IRAs.
2- Before Social Security begins. When you are not yet drawing Social Security, your income may be lower, which could place you in a lower tax bracket. This is a good time to consider Roth conversions.
3- When you can fill up the 12% tax bracket. In 2025, the income limit for the 12% tax bracket is $48,475 for single filers and $96,950 for joint filers. Before you jump into the 22% bracket, consider converting funds to fill up the 12% bracket. Converting smaller amounts over time could be more effective.
4- After a market drop of 20% or more. If the market drops, the same shares in your tax-deferred accounts are now worth less. This means you can convert them to Roth IRAs at a lower cost—potentially saving you on taxes.
5-Before Medicare at age 65. Higher income levels can trigger higher Medicare premiums (IRMAA surcharges). A Roth conversion can help reduce your income below the thresholds that cause these surcharges.
A Complex Strategy, But Potentially Worth It
Roth conversions can be a highly effective way to minimize taxes over the long term, but they require careful planning. It is important to convert at the right times and in the right amounts to maximize your potential tax savings.
Keep in mind, the tax landscape is ever-changing. Any strategy you implement today will likely require periodic adjustment as tax laws evolve.
If you would like personalized guidance on Roth conversions or any other retirement strategy, please feel free to reach out to me at (732) 844-3000. I am here to help!
Scott R. McGimpsey December 12th, 2025
Certified Financial Fiduciary®
This material was prepared by Scott McGimpsey and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Neither Cetera Wealth Services LLC nor Scott McGimpsey is engaged in rendering legal, accounting, or other professional services. If such assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal, state, or municipal tax penalty. Moreover, a diversified portfolio does not assure a profit or assure protection against loss in a declining market. UNIFIED PLANNING GROUP is an independent firm.
Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.