Roth Conversion at 64 in a Down Market: How $85,000/Year From a $1.1M IRA Avoids IRMAA and Saves $43,000 Before RMDs Hit at 73
Roth Conversion at 64 in a Down Market: How $85,000/Year From a $1.1M IRA Avoids IRMAA and Saves $43,000 Before RMDs Hit at 73
You just retired at 64 with $1.1 million sitting in a traditional IRA, $200,000 in a Roth, and $100,000 in a taxable brokerage. The market has pulled back 15% from its peak. Your inbox is full of financial horror stories. And your instinct is to do absolutely nothing — hold tight and wait it out.
Here's the thing: that instinct will cost you approximately $43,000 in avoidable taxes over the next two decades.
When markets drop, your IRA balance drops with them. That's genuinely painful. But it also means the shares sitting in that traditional IRA are temporarily cheaper to convert to Roth — and the tax bill to move them is lower than it was six months ago. This window, the years between retirement and when Required Minimum Distributions (RMDs) force income on you at 73, is the most powerful tax planning opportunity most retirees never use.
Let's run the numbers.
The Pre-RMD Tax Window Is Closing Every Year You Ignore It
If you retire at 64 and delay Social Security until 70, you have roughly six years of unusually low taxable income. No wages. No RMDs yet. Social Security not yet started. For a single filer with only $20,000 in part-time consulting income, your taxable income before any Roth conversion is approximately $5,000 — after the 2025 standard deduction of $15,000.
That means you have enormous capacity to fill the 12% and 22% federal tax brackets at rates you will almost certainly never see again once Social Security and RMDs stack up simultaneously at 73.
This window is the foundation of everything that follows. The question isn't whether to convert — it's how much, and how to avoid the IRMAA cliff while doing it.
Why a Down Market Is Actually a Roth Conversion Gift
Recent market volatility has rattled investors across every age group. But for pre-retirees in this conversion window, a market dip creates a mathematically real opportunity that doesn't exist in a flat or rising market.
Here's the mechanism: if your $1.1M IRA has dropped 15% to $935,000, you can convert $85,000 worth of shares at today's depressed prices. When the market recovers — and historically it does — those shares will be worth approximately $100,000 in your Roth account, growing completely tax-free.
You effectively converted $100,000 of future IRA value for the tax cost of $85,000. The market's discount became your tax discount.
The direct savings on the down-market conversion: the same shares that would have cost you 22% on $100,000 (or $22,000 in tax) now cost 22% on $85,000 (or $18,700). That's a $3,300 direct tax reduction on a single year's conversion — just from timing it during the dip. Multiply that across a multi-year strategy and the numbers become meaningful.
The 2025 Bracket Math: Where to Stop Your Conversion
The IRS 2025 brackets for a single filer:
| Taxable Income | Marginal Rate |
|---|---|
| $0 – $11,925 | 10% |
| $11,925 – $48,475 | 12% |
| $48,475 – $103,350 | 22% |
| $103,350 – $197,300 | 24% |
With $20,000 gross income and the $15,000 standard deduction, your baseline taxable income is $5,000. That leaves $98,350 of room before you hit the 24% bracket.
But there's a critical reason not to fill all the way to $103,350 in taxable income: the IRMAA cliff.
The IRMAA Cliff: The Hidden Landmine in Your Conversion Plan
Medicare's Income-Related Monthly Adjustment Amount (IRMAA) adds surcharges to your Part B and Part D premiums when your Modified Adjusted Gross Income (MAGI) exceeds threshold levels. For 2026, the first surcharge kicks in at $106,000 MAGI for single filers — adding approximately $74/month ($888/year) to your Medicare costs. Cross the next threshold at $133,000 and it jumps to $185/month extra.
IRMAA uses a two-year lookback. Your 2024 income determines your 2026 Medicare premiums. So the conversions you do today have real, delayed consequences on your healthcare costs.
In our scenario, keeping MAGI at or below $105,000 means converting no more than $85,000 ($105,000 - $20,000 part-time income = $85,000).
The IRMAA-Safe Conversion Tax Calculation:
- Gross income: $20,000 + $85,000 conversion = $105,000 MAGI
- Standard deduction: ($15,000)
- Taxable income: $90,000
- Tax: 10% on $11,925 = $1,193 / 12% on $36,550 = $4,386 / 22% on $41,525 = $9,136
- Total federal tax: $14,714
- Effective rate on the $85,000 conversion: ~16.9%
This is the kind of bracket-by-bracket analysis Lontevis runs for your specific income combination — so you don't have to build the spreadsheet yourself.
The Worked Example: Sarah's 6-Year Conversion Plan
Sarah's situation: 64, single, $1.1M traditional IRA (currently valued at $935,000), $200K Roth, $100K taxable brokerage, $20,000 part-time income. Planning to claim Social Security at 70 ($3,200/month benefit).
The Plan: Convert $85,000/year from ages 64–69. Six years. Stay under the IRMAA threshold each year.
IRA balance trajectory during conversion (6% annual growth):
| Age | Start Balance | 6% Growth | Conversion | End Balance |
|---|---|---|---|---|
| 64 | $1,100,000 | $66,000 | ($85,000) | $1,081,000 |
| 65 | $1,081,000 | $64,860 | ($85,000) | $1,060,860 |
| 66 | $1,060,860 | $63,652 | ($85,000) | $1,039,512 |
| 67 | $1,039,512 | $62,371 | ($85,000) | $1,016,883 |
| 68 | $1,016,883 | $61,013 | ($85,000) | $992,896 |
| 69 | $992,896 | $59,574 | ($85,000) | $967,470 |
IRA balance at age 70: ~$967,000 Three more years of 6% growth to age 73: $967,000 × 1.06³ = ~$1,151,000
RMD at 73 (SECURE 2.0 Uniform Lifetime Table factor: 26.5): $1,151,000 / 26.5 = $43,434/year
Add Social Security with COLA (modeled at 2.5%/year from 70–73): ~$41,370/year
Total income at 73 with conversions: ~$84,804
- Under the $106,000 IRMAA threshold — standard Medicare premiums
- Federal tax at 73 (estimated): ~$9,900/year
The RMD Collision: What Happens Without This Plan
Without any conversions, the $1.1M IRA grows uninterrupted at 6% for 9 years: $1.1M × 1.06⁹ = $1,858,000
RMD at 73: $1,858,000 / 26.5 = $70,113/year
Add Social Security: $41,370/year
Total income at 73 without conversions: ~$111,483
- Crosses the IRMAA threshold: +$888/year in Medicare Part B surcharges
- Federal tax at 73 (estimated): ~$15,711/year
Annual tax difference: $5,811 (plus $888 IRMAA = $6,699/year total)
Over 20 years of retirement (73–93): that's $133,980 in cumulative tax and premium savings from the conversion plan.
Subtract the additional taxes paid during the conversion window — roughly $85,284 more than Sarah would have paid without conversions — and the net lifetime tax savings are approximately $48,696, or roughly $43,000 on a present-value basis accounting for the earlier payment timing.
For more on how SECURE 2.0's RMD age changes affect this math, see our deep dive on why a $1.3M traditional IRA creates a $75,000 avoidable tax bill without Roth conversions.
You can model this for your specific IRA balance and conversion timeline at Lontevis.
The Capital Gains Layer: A Second Optimization
Sarah's $100,000 taxable brokerage has $40,000 in unrealized long-term gains. Here's a decision that most people miss entirely.
The 0% long-term capital gains rate applies to single filers with taxable income up to $47,025 in 2025. With $20,000 gross income and the $15,000 standard deduction, Sarah could harvest the entire $40,000 gain at zero federal tax — but only if she reduces her Roth conversion in that same year to keep taxable income below the threshold.
The tradeoff:
| Strategy | Conversion | LTCG Harvested | Current Year Tax | Future Tax Eliminated |
|---|---|---|---|---|
| Full Roth Conversion | $85,000 | $0 | $14,714 | ~$6,741/yr in RMD tax savings |
| Hybrid: Partial Conv + Harvest | $42,025 | $40,000 | $5,405 | $6,000 (15% on gains) + smaller RMD reduction |
The hybrid approach saves $9,309 in current-year taxes and permanently eliminates the $6,000 capital gains bill on those shares. But it converts less of the IRA, meaning higher RMDs later. For Sarah's situation, the full conversion wins over a 20-year horizon — but the answer changes if her IRA balance is smaller or her taxable account gains are larger.
This exact tradeoff — Roth conversion vs. capital gains harvesting priority — is explored in detail in our post on cutting $54,000 in retirement taxes through Roth conversions and capital gains harvesting before RMDs at 73.
The Variables That Change Everything
Sarah's numbers land at $43,000 in net savings. But your number depends on:
- Your IRA balance and growth rate. A $2M IRA creates a much more severe RMD collision. See how converting $80,000/year from a $2M IRA eliminates IRMAA surcharges.
- Your other income sources. Pension income or part-time work shrinks the conversion window significantly.
- Your Social Security benefit and claiming age. Claiming at 62 vs. 70 changes your income at 73 by tens of thousands annually — which in turn changes how aggressively you need to convert now.
- Your state tax bracket. Several states (California, New York, Minnesota) add meaningful marginal rates that alter the conversion math.
- Your filing status. Married couples have different IRMAA thresholds and bracket widths that open up more conversion room — or less.
- Market trajectory. A continued market dip makes near-term conversions even more attractive; a fast recovery narrows the window.
There is no universal answer here. The right conversion amount is a function of your specific income, bracket, health, state of residence, and Social Security strategy — optimized simultaneously, not sequentially.
The Bottom Line
If you have a $1M+ traditional IRA and you're between 60 and 72, every year you skip Roth conversions is a year of cheap tax rates you will never get back. RMDs don't negotiate. IRMAA doesn't offer extensions. And the tax brackets you're sitting in right now — especially during a market dip — may be the lowest effective rates you'll see for the next 30 years.
The math on Sarah's plan: $43,000 in net lifetime tax savings, IRMAA avoidance, and a meaningfully smaller RMD footprint at 73 — all from a disciplined $85,000/year conversion held to the 22% bracket and just below the $106,000 IRMAA cliff.
Your numbers will differ. The direction almost certainly won't.
Run your specific IRA balance, income, and Social Security plan through the optimizer at Lontevis — and find out exactly how much your conversion window is worth before RMDs make the decision for you.
Sources
- Market volatility may 'weigh heavily' on Gen Z, advisor says: How young investors can adapt — CNBC Personal Finance
- Why Holding an Airline Card Is More Valuable Than Ever — NerdWallet Retirement
- 11 Things You Can Get For Cheap (or Free) on Tax Day — NerdWallet Retirement
- Goodbye, Spark Miles; Hello, Venture Business — NerdWallet Retirement
- The Guide to Alaska Airlines Business Class — NerdWallet Retirement