A Roth conversion moves money from a traditional IRA (where withdrawals are taxed as ordinary income) to a Roth IRA (where qualified withdrawals are completely tax-free). You pay taxes on the converted amount now, in exchange for tax-free growth and withdrawals in the future.
For Southeast Texas retirees, the strategy is especially powerful: Texas has no state income tax, so you pay only federal taxes on the conversion — significantly lower than the cost in most other states.
Why the "Retirement Gap Years" Are the Golden Window
The years between retirement and age 73 (when RMDs begin) are often the lowest-income years of your life. You are no longer earning a salary, but you have not yet started Social Security or RMDs. This creates a window of favorable tax brackets that is ideal for Roth conversions.
During this window, you can convert traditional IRA funds to Roth at the lowest available tax rates — capturing the benefit of tax-free growth for potentially 20–30 more years. Once RMDs begin at 73, your taxable income increases and the conversion opportunity becomes more expensive.
Tax Bracket Management: The Core Strategy
The goal of bracket management is to convert enough each year to fill your current tax bracket without pushing into the next one. This maximizes the amount converted at the lowest available rate.
Example: Retired Couple, Age 65 (2026 Tax Brackets)
This couple could convert up to $70,300 per year at the 12% federal rate — with zero state tax in Texas.
Reducing Future RMDs
Every dollar you convert from a traditional IRA to a Roth IRA reduces your future Required Minimum Distributions. RMDs are calculated as a percentage of your traditional IRA balance — so a smaller balance means smaller mandatory withdrawals, lower taxable income, and potentially lower Medicare premiums.
For retirees with large traditional IRA balances, proactive Roth conversions can prevent a "RMD bomb" at age 73 — when large mandatory withdrawals push them into higher tax brackets and trigger IRMAA surcharges.
IRMAA: The Hidden Cost of Large Conversions
Medicare IRMAA (Income-Related Monthly Adjustment Amount) surcharges increase your Medicare Part B and Part D premiums when your income exceeds certain thresholds. In 2026, IRMAA surcharges begin at $212,000 in modified adjusted gross income for married couples filing jointly.
Large Roth conversions can push your income above IRMAA thresholds, increasing your Medicare premiums by $1,000–$5,000 per year. This is an important consideration in sizing your annual conversions — the goal is to convert as much as possible without triggering IRMAA.
Legacy Planning: Tax-Free Inheritance
Roth IRAs are one of the most powerful legacy planning tools available. Unlike traditional IRAs, Roth IRAs have no RMDs during the owner's lifetime — and inherited Roth IRAs allow beneficiaries to take tax-free distributions over a 10-year period.
For Southeast Texas retirees who want to leave a tax-efficient inheritance, converting traditional IRA funds to Roth — and paying the taxes yourself — can significantly increase the after-tax value of the inheritance for your heirs.
Frequently Asked Questions
When is the best time to do a Roth conversion?
The optimal window is typically the years between retirement and age 73 (when RMDs begin). During this period, income is often lower than during working years, creating favorable tax brackets. Texas retirees have an additional advantage: no state income tax means the conversion cost is lower than in most other states.
How much should I convert to a Roth each year?
The optimal conversion amount is typically the amount that fills your current tax bracket without pushing you into the next bracket. A fiduciary advisor can model the optimal conversion amount for your specific situation, accounting for Social Security timing, pension income, and IRMAA thresholds.
Does a Roth conversion affect Medicare premiums?
Yes. Large Roth conversions can trigger Medicare IRMAA surcharges, which increase your Medicare Part B and Part D premiums. IRMAA is based on your income from 2 years prior. This is an important consideration in sizing your annual conversions.
Is a Roth conversion worth it in Texas?
Texas is one of the best states for Roth conversions. With no state income tax, you pay only federal taxes on the conversion amount — compared to states like California where you would also pay up to 13.3% in state taxes.
Build Your Roth Conversion Strategy
Schedule a complimentary tax planning consultation with Richard Placette II. We will model your optimal annual conversion amount, project your future RMDs, and build a multi-year strategy to minimize your lifetime tax burden.
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Richard Placette II
Financial Advisor, MRB Capital Group
Serving Beaumont, Lumberton, Port Arthur, Orange, and Southeast Texas
Educational content only — not individualized investment advice. This article is for informational purposes only and does not constitute investment or tax advice. Consult a qualified tax professional before executing any Roth conversion strategy.