The setup: one quiet tax year before Social Security and Medicare lock in
A 64-year-old single retiree wrapped up her career in 2025 and now holds $1.6 million in a traditional IRA, $200,000 in a Roth, and $250,000 in a taxable brokerage account. She plans to delay Social Security until age 70, and Medicare does not begin until 65. That leaves 2026 as a year with almost no taxable income arriving. The core question is whether to leave the traditional IRA untouched or use the empty bracket space to convert a chunk to Roth.
This situation is more common than it appears. Retirees in their early sixties routinely encounter a narrow window where wages have stopped, Social Security has not started, and required minimum distributions (RMDs) remain a decade or more away. Coasting through that window carries a quantifiable cost.
The real tension: 24% now versus 22% to 24% later, plus IRMAA, plus state, for life
The 2026 single-filer brackets create a specific opportunity. The 24% bracket runs from $105,700 up to $201,775 of taxable income, and 32% kicks in above that. The standard deduction for a single filer is $16,100. Converting $185,000 from the traditional IRA pushes her taxable income to $168,450, right near the top of the 24% bracket.
One notable wrinkle from the One Big Beautiful Bill Act, signed into law in 2025: taxpayers age 65 or older can claim a new $6,000 senior deduction on top of the standard deduction for tax years 2025 through 2028. That deduction phases out above $75,000 MAGI, however, and is nearly gone by $175,000. At a $168,450 conversion MAGI, barely $393 of the $6,000 survives the phase-out. A full bracket-fill conversion effectively trades away most of that senior benefit, which is one reason some advisors prefer smaller annual conversions during this window.
Federal tax on the $185,000 conversion works out to roughly $33,276, paid from the brokerage account so every converted dollar reaches the Roth intact. The traditional IRA shrinks to roughly $1.42 million. Under SECURE 2.0, a retiree born in 1961 or 1962 faces an RMD starting age of 75, not 73, placing the first mandatory withdrawal roughly eleven years out. Assuming 6% annual growth over that period, the converted slice grows to approximately $352,000, tax-free for life.
The alternative tells a different story. That same $185,000 left in the traditional IRA also grows to roughly $352,000 by RMD time, but every withdrawal is taxed at her future combined rate. Once Social Security stacks on top, that rate will likely sit at 22% to 24% federally. With a median female life expectancy from 73 of 16 to 17 additional years, cumulative federal tax on the unconverted path runs $90,000 to $110,000. Add $25,000 to $35,000 of Medicare IRMAA surcharges as her MAGI rises, plus $15,000 of state tax at a 5% rate, and the conversion avoids $130,000 to $160,000 of direct lifetime tax.
The compounding advantage is the larger story. Roth balances carry no RMDs, so the converted slice keeps growing untouched. By age 90, that Roth portion reaches roughly $750,000 versus $352,000 if it had been drawn down on the IRA schedule, a gap exceeding $390,000. Total nominal lifetime value of the single-year decision lands somewhere between $300,000 and $340,000.
The three paths that actually move the number
- Fill the 24% bracket once, this year. The conversion happens before Social Security, before RMDs, and while the brokerage account can absorb the tax bill cleanly. Best for retirees with a large traditional IRA, roughly a decade until RMDs, and outside cash to cover conversion tax. The trade-off: the $6,000 OBBBA senior deduction (available at 65) is largely erased by the elevated MAGI.
- Smaller conversions spread across multiple years. Filling only the 22% bracket, up to roughly $50,400 of taxable income each year from 64 to 70, captures a lower rate but converts far fewer dollars before Social Security adds taxable income. Staying below $75,000 MAGI each year also preserves the full $6,000 OBBBA senior deduction once she turns 65, a benefit worth up to $1,440 per year at a 24% rate through 2028. This approach is weaker once benefits begin and every conversion dollar stacks on top of Social Security income.
- Skip conversions entirely. Most retirees choose this path because writing a $33,000 check stings more than ignoring a future obligation. The bill arrives anyway, spread across sixteen or more years of RMDs at higher combined rates with IRMAA attached. For a $1.6 million pre-tax balance, this is the most expensive choice by a wide margin.
What to act on first
Three rules govern the outcome. First, the conversion tax must be paid from outside the IRA. Using IRA dollars to cover the tax shrinks the converted amount and destroys most of the benefit. Brokerage or savings cash funds the bill.
Second, factor in the IRMAA two-year lookback. A 2026 MAGI of $168,450 lands in IRMAA Tier 2 ($137,000 to $171,000 single) for 2028 only. The 2026 IRMAA threshold for single filers now sits at $109,000, meaning this conversion clears even the Tier 1 floor by a wide margin. That added premium is a real one-year cost and should be priced into the decision before the Medicare letter arrives.
Third, watch the five-year clock on converted dollars. Each calendar year of conversion starts its own clock for tax-free treatment of earnings. At 64 with substantial other liquidity, this constraint rarely binds, but it should be confirmed before locking in a six-figure conversion.
Editor’s note: This article was updated to reflect the SECURE 2.0 Act change raising the RMD starting age to 75 for retirees born in 1960 or later (affecting the growth horizon and projected Roth values), and to add context on the new $6,000 OBBBA senior deduction for taxpayers 65 and older, which phases out above $75,000 MAGI and interacts directly with the conversion sizing decision. The 2026 IRMAA Tier 1 threshold of $109,000 for single filers was also incorporated.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks