MW My RMD starts next year. Should I convert my whole IRA to a Roth?
By Dan Moisand
The most important variables are the tax rates
Dear Dan,
I'm 72 years old and have my IRA in stock. I start required minimum distributions next year so I want to convert to a Roth IRA. How much should I convert? Should I do it all at once or should I do it on a year to year basis?
- Ready to Convert
Dear Ready,
A careful analysis year to year is usually better than converting the whole thing just to avoid required minimum distributions $(RMD)$ but there are several variables to consider.
When you execute a Roth conversion, you pay tax now to avoid tax later. If the rate paid upon conversion is lower than the rate that would be paid later, the conversion pays off. The bigger the difference between the rates the better the payoff.
One consideration is the size of the IRA. If you only have $10,000 in the IRA, converting will only add $10,000 of income to your tax return. Whereas converting a $1 million IRA will result in a tax rate much higher than most Americans would likely face had they not converted. That said, the size of the conversion alone is not the main driver of the decision. Sometimes, even a small conversion can trigger unwanted costs like Income-Related Monthly Adjustment Amounts, which are surcharges on Medicare Parts B and D, known as IRMAA.
Read: I'm blindsided by extra Medicare charges because of my income. How do I avoid this situation?
The most important variables are the tax rates. Assessing the rate on a conversion this year can be done with a high degree of accuracy. We create a mock tax return for clients to help quantify the cost of the conversion with great confidence. We will run these projections using different amounts until the converted amount illustrated starts to get taxed at a rate that is higher than desired.
The rate applicable in the future can be far trickier to assess.
Required minimum distributions, for many, increase over time and fear of large payouts drives many people to convert to Roth IRAs because an individual's Roth IRA is not subject to RMD.
At first, the increases tend to be modest. At age 73, the typical RMD is 3.77% of the account balance at the end of the prior year. By age 80 the percentage is still under 5%. However, the percentage starts to increase at a quicker pace. By 90, the RMD is 8.2% and 11.2% just five years later.
How the IRA is invested matters. Because the RMD is based on each year's account balance, conservative holdings tend to have smaller RMD increases year to year. Aggressive holdings mean more earning potential but also more potential for lower balances in any given year making RMD less predictable.
A change in marital status can cause the future tax rate to change. Often the rate rises upon the death of a spouse due to the infamous "widow's penalty." Conversely, getting married can sometimes reduce the applicable rate. How long the changed marital status lasts can matter too. If you are only widowed one year before dying yourself, the higher rate from the widow's penalty may not persist.
After you and your spouse are gone, what will be the rate paid by your beneficiary? Leave it all to one child and it could push them into a higher bracket. Leave it to charity and there are no taxes. Leave it to three kids with three different income levels and your church and there are four potential brackets to estimate.
Nonetheless, as challenging as assessing or guessing future tax rates can be, if you have good reason to believe enough of the funds would be taxed at a higher rate in the future, it can be worthwhile to determine the taxes on various conversion amounts every year.
This is a good year for you to analyze this, because next year required minimum distributions begin and you cannot convert RMD, only amounts in addition to RMD.
If you have a question for Dan, please email him with 'MarketWatch Q&A' on the subject line.
-Dan Moisand
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December 09, 2025 10:42 ET (15:42 GMT)
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