Every Year a 62-Year-Old Skips a Roth Conversion Costs About $3,000 in Extra Tax Later. On the Average 60-to-64-Year-Old’s $246,500 401(k), the Window Is 11 Years Long

Every dollar in a traditional 401(k) will eventually be taxed as ordinary income, but the only question is the rate. For many people, this is their lowest-income period. The years between leaving work and the start of required minimum distributions bring the lowest taxable income of their adult lives, and that makes those years the cheapest time to pay the bill through a Roth conversion. For the average saver in their early 60s, each year that passes without a conversion adds roughly $3,000 to the future tax bill. This article walks through where that figure comes from and when it applies.

Average Early-60s Balances Are Smaller Than They Look

Fidelity’s age data shows the average 401(k) balance for savers ages 60 to 64 at $246,500, just above the $244,900 held by savers ages 55 to 59. Balances level off at this age because savers stop building the account and start getting ready to draw it down.

That average also exaggerates what a typical saver holds. If 10 people each have $50,000 and one more arrives with $5 million, the median stays at $50,000 while the mean rises sharply. Vanguard’s How America Saves shows this gap in real accounts: participants 65 and older hold an average of $299,442 but a median of only $95,425. Most savers near 62 will find their own conversion figures smaller than the example below, though the process works the same way.

Where the 11-Year Window Comes From

IRS Publication 17 says traditional IRA owners generally must begin withdrawals by April 1 of the year after they reach age 73. Counting from 62 to 73 gives the 11-year window.

Federal law moves the starting age to 75 for anyone who reaches 74 after December 31, 2032, a rule that covers today’s 62-year-olds, so their legal runway is longer. In practice, though, the low-tax period usually ends sooner, because Social Security benefits add taxable income every year once they start.

A conversion is taxed as income in the year it happens, but under 26 U.S.C. § 408A(d)(3)(A), the 10% early-distribution penalty does not apply. After the money moves into a Roth IRA, Publication 17 notes that the owner never has to take minimum distributions from it while alive.

How the $3,000 Estimate Adds Up

To empty a $246,500 balance over 11 years, a saver would convert about $22,409 a year. In 2025, the 12% bracket for married couples filing jointly covered taxable income up to $96,950. A retired couple with modest other income could convert that amount each year and owe about $2,689 in federal tax.

Waiting raises the effective tax rate on later withdrawals. After a 3.6% cost-of-living adjustment, the average aged couple is estimated to collect $3,355 a month in 2027. Under 26 U.S.C. § 86(a), up to 85% of those benefits become taxable as a household’s other income rises.

Within that phase-in range, each extra dollar of required withdrawals can also pull 85 cents of benefits into taxable income. That turns a 12% bracket into an effective marginal rate of 22.2%. Taxed at that rate later, the same $22,409 would cost about $4,975, a gap of roughly $2,286 compared with converting it now.

That gap also grows over time, because the untaxed portion keeps compounding inside the traditional account. Assuming 3% annual growth for 11 years before the money comes out, the difference reaches about $3,164. In this example, that is the cost of each year without a conversion. This is the focus of our free Roth Window guide, because those quiet years between the last paycheck and the first required withdrawal may be the lowest tax rate a saver ever sees again.

Assumptions Behind the Estimate

The estimate rests on several assumptions. Couples with little income besides Social Security may never enter the phase-in range, and for them the rate gap shrinks toward zero, since paying the conversion tax out of the 401(k) itself cuts the benefit because the withdrawn cash stops compounding. New legislation can also change tax brackets.

Using cash to pay the tax also has a cost. With the federal funds target rate at 4% as of October 16, 2026, savings accounts and money-market funds pay meaningful interest while that money sits. Some plans also allow conversions inside the 401(k) under 26 U.S.C. § 402A(c)(4). Others require rolling the money to an IRA first, so checking the plan rules is the first practical step.

Steps to Take Before the Low-Tax Years Run Out

1. The starting point is clear. Map taxable income year by year until required distributions begin. The years between the last paycheck and the first Social Security check usually have the lowest income, making them the cheapest years to convert.
2. This is the typical approach. Conversions are sized to the top of the 12% bracket each year. Converting a large sum in one year can push income into the 22% or 24% bracket and wipe out the rate advantage the strategy depends on.
3. The converted balance stays intact. Paying the conversion tax from savings held outside the 401(k) preserves it. That way the full converted amount keeps growing tax-free, and the cash keeps earning interest until the tax is due.

Waiting pushes the tax on a traditional 401(k) into years when Social Security and required withdrawals stack on top of each other. For a household with an average balance and other income high enough to hit the benefit phase-in, converting during the low-income years before benefits start is cheaper than waiting. Lower-income households may gain less, and the right move depends on each household’s year-to-year income.

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