Roth conversions can be powerful—but only when done right. And for high-income retirees, a single misstep can lead to massive, unexpected tax bills.
In 2025, with new tax legislation and shifting brackets, many affluent retirees are rushing to convert pre-tax dollars to Roth accounts without fully understanding the long-term implications. Here’s what they’re getting wrong—and how to do it better.
1. Timing Is Everything
Many retirees wait too long—or act too quickly. Ideally, Roth conversions should be done during low-income years (think: the gap between retirement and required minimum distributions at age 73). Converting too much in a high-income year could push you into the top tax brackets unnecessarily.
2. Bracket Creep Is Real
Even partial conversions can push retirees into higher marginal tax brackets. This affects not just your federal income taxes, but potentially Medicare premiums and taxation of Social Security benefits.
3. The Legacy Angle
Roth accounts don’t have RMDs for original owners—and heirs benefit from tax-free growth. Converting some pre-tax dollars now might reduce future estate tax exposure and create more generational wealth.
4. Coordination Beats Guesswork
A piecemeal Roth strategy won’t cut it. True optimization requires coordinating with your other income sources, healthcare coverage, and estate plan.
Final Thought:
If you’re considering a Roth conversion in 2025, do it with a plan—not on a whim. The tax code is more nuanced than ever. We help high-income retirees use conversions to gain control, reduce long-term taxes, and build a legacy that lasts.
