Retire at 65 With $420,000 in a 401(k) and a $60,000 Pension and Convert Nothing for Eight Years. Whether That Was a Mistake Depends on Arithmetic Most People Never Run

A couple retiring at 65 with $420,000 in a 401(k) and a $60,000 pension has probably read plenty of advice on Roth conversions. A conversion means moving money from a traditional account into a Roth. You pay income tax on the amount now, and later withdrawals come out tax-free.

The common advice is to convert before required minimum distributions start. Those are the mandatory yearly withdrawals, and for this couple they begin at 73. With only eight years to go and a pension already using up the low brackets, it’s fair to ask whether that advice was ever meant for them.

How a Pension Fills the Brackets First

Most conversion advice assumes two things: a long gap before required withdrawals, and very little income during that gap. This couple has a short gap and steady pension income during it. For tax year 2026, the IRS sets the joint standard deduction at $32,200. Each spouse 65 or older adds $1,650, and a separate senior deduction adds $6,000 per person through 2028.

Together, those deductions total $47,500. So $12,500 of the pension is taxable. Joint income above $24,800 is taxed at 12%, so part of the pension’s taxable piece already lands in that bracket before a single dollar gets converted. The 22% rate starts once joint taxable income tops $100,800. That gives the couple $88,300 a year of room to convert at 12%.

If they converted that much every year and the account earned 5%, only about $23,700 would be left after five years. So even with the short window, they can convert everything at 12%.

Running Both Paths Side by Side

The model rests on a few assumptions. Returns come in at 5% a year, which matches the current 5% yield on the five-year Treasury. Today’s tax rules stay in place for the entire period, even though the senior deduction is scheduled to end. Social Security is left out of the picture, and any tax owed gets paid out of teh account itself.

The comparison follows $100,000 over 20 years, from age 65 to 85. With no conversion, that $100,000 grows to $265,330. Now add the first required withdrawal of about $23,400, which brings the couple’s joint taxable income to $35,900, still well within the 12% bracket. After paying tax, they’re left with $233,490.

If they convert at 12% today instead, they also end up with $233,490. Waiting means a higher tax bill in dollars, about $31,840, but they keep exactly the same amount either way. Change the rate and the result changes with it. If later withdrawals are taxed at 22%, converting comes out ahead, $233,490 against $206,957. If conversions are taxed at 22% now and withdrawals at 12% later, those numbers simply trade places.

Five Questions That Decide It

1. Rate now versus rate later. When the two rates are the same, converting adds very little.
2. Cash outside the account. Paying the tax with outside money gets more into the Roth. If the tax has to come out of the account, the small edge goes away.
3. Widowhood. A surviving spouse files as single, with a $24,150 deduction. If the full pension continues, that survivor’s taxable income would be $59,250, above the single 22% threshold of $50,400. That scenario makes a stronger case for converting, even with a short window.
4. Heirs. Children inheriting during their highest-earning years would pay higher rates on their own traditional withdrawals.
5. Medicare surcharges. Higher Medicare premiums, called IRMAA, apply when joint income tops $218,000, or $109,000 for single filers. Each spouse pays the surcharge separately, and premiums are based on the tax return from two years earlier.

When Doing Nothing Is the Right Call

Some retirees will pay the same rate later as they would now. If they also lack outside cash for the tax and their heirs are in modest brackets, converting gets them little or nothing (we sized up the low-tax years between retirement and required withdrawals, when conversions are cheapest, in a free Roth window guide). For them, eight years without a conversion was a reasonable result.

What Works Instead

A qualified charitable distribution is a gift paid directly from an IRA to a charity, so you’d need to roll 401(k) money into an IRA first. It’s allowed starting at age 70½, up to $108,000 a year under the latest IRS publication. The money never counts as income, but it does count toward required withdrawals.

Taking ordinary withdrawals during the window also reduces the balance that future requirements are based on. The initial mandatory withdrawal can wait until April 1 of the following year, but then two withdrawals land in the same tax year. It’s also worth planning the Social Security claiming age together with everything else that fills the brackets.

Two Rates Settle the Question

The decision comes down to two numbers: the bracket a conversion would fall into this year, and the bracket required withdrawals are likely to face later, including after one spouse dies. If the later rate is higher, converting up to the point where the two rates meet is better. If the rates are the same, or the later one is lower, converting nothing is a reasonable result.

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