Most retirees wait until age 73 forces mandatory withdrawals, but converting traditional retirement assets to a Roth IRA in your 60s removes them from the RMD calculation entirely, since Roth accounts never require lifetime distributions and compound tax-free.
A retiree who shifts part of a traditional IRA or 401(k) into a Roth IRA during their 60s can strip those assets out of the pool that later triggers mandatory withdrawals, a move that permanently lowers the required minimum distributions arriving at age 73. The strategy carries weight because Roth IRA owners face no lifetime distribution requirement, according to Vanguard, letting the money compound tax-free for as long as the owner lives.
"Waiting until the government compels you to withdraw creates two problems: it makes tax planning difficult, and it creates cash flows when you potentially have less use for it," said the analysis of retiree behavior, which draws on research by David Blanchett and Michael Finke showing a typical 65-year-old retired couple withdraws just 2.1 percent of their portfolio each year, well below the standard 4 percent rule.
The required minimum distribution, or RMD, applies in 2026 to traditional IRAs, 401(k)s, 403(b)s and similar tax-deferred accounts once the owner reaches age 73, per the Internal Revenue Service. Under the SECURE 2.0 Act of 2022, anyone born between 1951 and 1959 faces a required beginning age of 73, while those born in 1960 or later start at 75. A JP Morgan study of client data found roughly 33 percent of retirees took little or no withdrawals until RMD rules compelled them, and that spending tends to decline through retirement — meaning retirees are healthier and more active in their 60s, need more cash in that early "go-go" phase, yet face larger forced withdrawals by their mid-70s.
The stakes are measurable. A retiree who converts part of a traditional account to Roth in a lower-income year during their 60s moves that money out of the balance on which the annual withdrawal is calculated, shrinking future forced distributions. Because Roth withdrawals are tax-free and carry no lifetime requirement, the conversion can keep a retiree from being pushed into a higher tax bracket once compulsory distributions begin. The trade-off is the income tax owed at conversion, which is why the strategy works best when spread across years when taxable income is relatively low.
The cost of getting the RMD rules wrong is steep. Before SECURE 2.0, the excise tax on a missed distribution was 50 percent of the shortfall; the law cut that to 25 percent, dropping to 10 percent if the error is corrected within two years by filing Form 5329. The rules also differ by account type: traditional IRAs can aggregate balances for a single combined RMD, but each 401(k) plan stands alone and must be withdrawn from separately, a trap that has caught retirees holding multiple old employer plans.
For retirees weighing the move, the conversion is not a one-size-fits-all answer. Money in a workplace 401(k) is generally accessible without the 10 percent early-withdrawal penalty starting at age 55 if the participant separates from service that year or later, versus 59 and a half for IRAs, and ERISA-covered balances carry stronger federal creditor protection in some cases. But for those with sizable traditional balances who expect to stay in a similar or lower bracket, converting in the 60s turns a future forced, taxable distribution into a tax-free one — a shift that can save thousands of dollars over a retirement that may span two decades or more.
This article is for informational purposes only and does not constitute investment advice.
