Sitting on a $960,000 IRA at 63? The Roth Conversion Math That Turns Future RMDs Into $4,700 a Month Tax-Free

You’re 63. You saved steadily, rolled your 401(k) into an IRA, and watched it grow to $960,000. Then it sinks in: every dollar in there gets taxed when you take it out, and eventually the IRS makes you take it out.

Those forced withdrawals are called required minimum distributions, or RMDs. The rules now require anyone who turns 74 after 2032 to start RMDs at age 75. If you were born in 1963, that’s you. So you have years to move money into a Roth IRA on your own schedule, pay the tax at rates you pick, and build an income stream the IRS never touches.

Eight $120,000 Slices Keep the Tax Bill Predictable

A Roth conversion transfers money from a pretax IRA into a Roth. You owe ordinary income tax on whatever you convert that year. This model splits $960,000 into eight yearly conversions of $120,000. It assumes you have no other income and the balance stays flat.

For a single filer, the 2026 standard deduction of $16,100 leaves $103,900 of taxable income. That falls inside the 22% bracket, which tops out at $105,700. The tax comes to about $17,570 a year, or $140,560 total.

A married couple gets a $32,200 standard deduction, which leaves $87,800 of taxable income. That keeps the whole conversion in the 12% bracket. The tax is about $10,040 a year, or $80,320 total.

Medicare and Health Coverage Costs Hide in Each Conversion

IRMAA is a Medicare surcharge, and once your income passes a set threshold, your Part B and Part D premiums go up. Medicare looks at your income from two years earlier, so a conversion at 63 sets the premium you pay at 65. In 2026, the first surcharge kicks in above $109,000 for singles and $218,000 for couples. A single filer converting $120,000 crosses that line, and Part B jumps from about $203 to $284 a month. The couple stays well under it.

The pressure before 65 can be worse. The enhanced marketplace subsidies expired December 31, 2025. Now the premium tax credit goes away completely once household income passes 400% of the federal poverty line, and conversion income counts toward that.

Paying the Tax From Outside Keeps the Roth Whole

Pay the conversion tax with cash or money from a taxable brokerage account. Any dollar you hold back from the IRA to cover the bill never grows tax-free. Roth withdrawals come out completely tax-free once you’re past 59½ and the Roth has been open for five tax years, counted from your first contribution.

For this portfolio, a Roth is the right home. In a regular account, REIT dividends only count as qualified, lower-taxed income for the portion the REIT designates. Most of what BDCs pay comes from loan interest and gets taxed as ordinary income. Inside a Roth, none of it is taxed at all.

A 6.9% Blend Clears $4,700 a Month

The portfolio blends to about a 6.9% yield. On the full $960,000, that’s roughly $5,481 a month tax-free. You’d only need about $823,000 to hit $4,700 a month. That changes if a single filer pays tax from the IRA. Then income falls to about $4,678, just short of the goal. A couple paying from inside still gets about $5,022.

Amplify’s Partial Call Writing Leaves Room for Growth

Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO) owns blue-chip dividend stocks and sells covered calls only some of the time. Weight: 20%. Yield: about 4.8%, or roughly $764 a month. Because it doesn’t sell calls on everything, it leaves more room for price increases than a fund that does.

Goldman Sachs Turns the S&P 500 Into Monthly Income

Goldman Sachs S&P 500 Premium Income ETF (NASDAQ:GPIX) sells call options on the S&P 500 it owns for monthly income. At a 20% weight, its roughly 8.4% yield pays about $1,344 a month. Covered call funds tout tax advantages, but those don’t matter inside a Roth.

W. P. Carey Is Rebuilding Its Dividend After the Office Spinoff

W. P. Carey (NYSE:WPC) owns buildings on long net leases, meaning the tenants pay the taxes, insurance, and maintenance. Weight: 15%. Yield: about 5.8%, or roughly $698 a month. After it spun off its office buildings, it cut the quarterly dividend to $0.86 from about $1.07. It has raised the payout every quarter since, and the latest is $0.95.

Sixth Street Lends to Midsize Firms With Few Bad Loans

A business development company, Sixth Street Specialty Lending (NYSE:TSLX) lends to midsize private businesses. It gets a 15% weight and yields about 9.4% on the $0.42 base dividend, or roughly $1,133 a month, plus an extra $ 0.01. Lower rates cut the base from $0.46. Nonpaying loans are just 2% of the portfolio at cost.

Option Income Drives FT Vest’s Dividend Aristocrats Payout

FT Vest S&P 500 Dividend Aristocrats Target Income ETF (CBOE:KNG) holds the Dividend Aristocrats in equal amounts and sells calls on them to hit an income target. Weight: 15%. Yield: about 8.0%, or roughly $955 a month. Most of that payout comes from the option income the fund generates.

Janus Henderson’s Top-Rated Loan Slices Float With Rates

The Janus Henderson AAA CLO ETF (NYSEARCA:JAAA) buys the top-rated slices of collateralized loan obligations, big bundles of corporate loans. At a 15% weight, it yields about 4.9%, or roughly $587 a month. Its payments move with short-term rates, so income falls when the Fed cuts.

Complete the First Conversion Before December 31

Over eight years, the conversion tax runs about $140,560 for a single filer or $80,320 for a couple. Pay it from outside the IRA, and the portfolio produces roughly $5,481 a month. This year, the decision is how big to make the first conversion. A couple can convert the full slice and stay in the 12% bracket. A single filer has to decide whether staying under the Medicare surcharge line is worth converting a smaller amount.

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