We’re 67 Years Old With $1 Million in IRAs. Is It Too Late to Convert to a Roth?

At age 67, converting $1 million in IRAs to a Roth can be appealing because it offers tax-free income in retirement. The IRS allows Roth conversions at any age or income level, though withdrawals are restricted for five years after opening the account. Converting later in life can still make sense, but it involves tradeoffs related to taxes, healthcare costs, and estate planning that should be carefully reviewed before making the move. Ask a financial advisor if Roth IRA conversion makes sense for you.

Understanding Roth IRA Conversions

A Roth conversion involves moving retirement savings from a traditional IRA account into a Roth IRA account. Traditional IRA contributions provide tax deductions, lowering your taxable income each year you contribute. But traditional IRA withdrawals taken during retirement get taxed as ordinary income based on whatever tax bracket you fall into at that time.

Roth IRAs work in the opposite manner. Contributions are made using after-tax dollars, so you don’t lower your current taxable income with contributions. However, qualified withdrawals later in retirement are completely tax-free. The conversion catch is that when you do one you have to pay any taxes due now on the funds you convert. This is not an insignificant concern.

A 67-year-old couple converting their entire $1 million traditional IRA into a Roth version in a single year would owe income tax immediately on the entire converted balance. This lump of income would also put them into the highest income tax bracket. Tax rates could be as high as 37% federally, plus applicable state taxes of 2% to 13% depending on your location. Naturally, few people are eager to write a six-figure check to the IRS, although there are ways to make this less painful.

Roth IRA Conversion Specifics

Let’s walk through what could happen if a retired 67-year old couple with $1 million in a traditional IRA and average combined annual Social Security benefits of about $49,000 ¹ decides to convert to a Roth IRA. There are two main ways of doing this, including all at once and over time.

If they opted to convert the entire $1 million IRA balance to a Roth IRA in a single tax year, they would incur federal and state income taxes that year on the full $1 million converted amount, placing them in the highest income tax bracket. Depending on their state of residence, ranging from no state income tax to a state like California, the total tax cost could run from roughly $295,000 to $395,000 on a $1 million conversion.

That’s the all-at-once approach. By taking their time and spreading the $1 million conversion over 10 years at $100,000 converted per year, they would only owe income tax each year on $100,000. Assuming for this example that Social Security benefits and income tax brackets stay unchanged, and factoring in the enhanced senior deduction, they would fall into the 12% marginal federal tax bracket. They would owe about $10,800 in federal taxes on their 2026 return for the $100,000 conversion, a much more manageable bill. Spread over a 10-year period, the total federal tax paid comes to roughly half as much as the all-at-once approach.

However, note that this strategy is only worthwhile if they don’t need the money until late in retirement, as they’ll need to let the account age at least five years before making a proper withdrawal. This may be useful if they’re looking to leave a tax-free inheritance.

They would still owe taxes on their Social Security benefits as well in each of those 10 years. But diverting some savings into the Roth IRA provides some future tax-free income capacity that can be drawn on to balance out taxes owed later on traditional 401(k) or IRA withdrawals. Conversion diversification lets them prudently minimize their overall lifetime tax liability. It also creates a pool of tax-free legacy money if they eventually gift a portion of the Roth account to children or grandchildren.

Additional Roth IRA Conversion Considerations

Other factors also may weigh on a sizable Roth IRA conversion decision. For example, realizing the conversion income could impact taxation of Social Security benefits and Medicare premiums.

Estate plans should also be taken into account. As another example, if you plan to leave all your wealth to a charity, it likely makes sense to leave funds in the traditional IRA rather than converting to a Roth because the charity won’t owe taxes on the bequest. You’ll also need to ensure beneficiaries on the Roth are named correctly and evaluate the conversion’s impact on any trusts you have set up.

Your retirement income likely won’t come from just one source. Our retirement calculator helps you see how Social Security and personal savings could combine over time.

Making the Roth IRA Conversion Call

If you’re considering a large Roth conversion, there are a few steps to take:

1. Designate beneficiaries: First, clarify what should happen to the IRA assets upon death. If the goal is to leave a tax-free inheritance to your heirs, calculated Roth conversions can guarantee continued tax-free growth.
2. Consider tax rates: Next, assess current marginal and future effective tax rates in retirement. If you expect tax rates to rise substantially, paying taxes now through a conversion could save money later.
3. Run a financial analysis: Finally, analyze existing income streams and multi-year tax scenarios, as well as your healthcare budget and estate plans.

In most cases, you will wind up choosing not to convert all at once. For those with large traditional IRAs, strategic partial conversions tailored to your needs often make the most financial sense.

How to Time Your Withdrawals to Minimize Taxes

The order in which you withdraw funds from different accounts can affect how much tax you pay in retirement. Each account type is taxed in its own way, so planning withdrawals carefully can help reduce total taxes over time.

Many retirees start by using money from taxable accounts first. This allows traditional IRA and 401(k) balances to continue growing tax-free until later. During the early retirement years when income may be lower, some investors choose to convert part of their traditional IRA to a Roth IRA at a smaller tax rate before RMDs begin at age 73, which applies to those born between 1951 and 1959.

When RMDs begin, those withdrawals are taxed as ordinary income. At that point, having Roth IRA assets can add flexibility because their withdrawals are not taxed and not subject to RMDs. Combining both account types can help smooth out income and keep you from moving into higher tax brackets.

The timing of Social Security benefits also matters. Delaying benefits until age 70 can provide several years with lower taxable income. That window can be useful for partial Roth conversions. Once benefits start, more of your income may become taxable, leaving less room for conversions.

This type of retirement strategy does not completely eliminate taxes, but it helps manage when they are paid.

Why the Conversion Window Is Six Years, Not Ten

The 10-year conversion plan described earlier assumes a clean runway of low-income years to spread the conversions across. For a 67-year-old couple, that runway is shorter than it appears.

RMDs from the traditional IRA begin at age 73. That gives this couple six years to convert before mandatory distributions start adding taxable income to their return every year. After 73, they must take the RMD first, pay tax on it, and then convert additional funds on top of that. The RMD itself cannot be redirected into a Roth. It simply adds to their taxable income and shrinks the bracket space available for any conversion they still want to do.

On a $1 million IRA, the first-year RMD at 73 would be roughly $38,500 based on current IRS life expectancy tables. That amount plus $49,000 in Social Security puts the couple at nearly $88,000 in ordinary income before they convert a single dollar. 

Any conversion at that point stacks on top of an income floor that did not exist during the six years between 67 and 73.

What the Six-Year Window Looks Like in Practice

Converting the full $1 million over six years means roughly $167,000 per year. That is a very different tax picture from the $100,000 per year used in the 10-year example.

At $100,000 per year, the couple stays in the 22% federal bracket on the conversion income. At $167,000 in conversions per year, the couple would have a projected taxable income of $168,200, assuming the standard deduction is taken. Using 2026 tax brackets, the federal tax owed comes to $26,425, an increase of roughly $15,600 compared to the $100,000-per-year conversion scenario.

Over six years, total federal tax on the conversions would run roughly $150,000 to $175,000, assuming deductions and tax brackets remain the same and the couple doesn’t see raises in Social Security benefits. That is more than the $110,000 to $130,000 estimate for the 10-year plan, but it comes with a significant benefit: by the time RMDs are scheduled to begin at 73, the traditional IRA balance is zero or close to it.

No RMDs means no mandatory taxable income from the IRA for the rest of their lives. Every dollar is now in a Roth where it grows and comes out tax-free.

Compare that to the 10-year plan, where four years of conversions still remain when RMDs start. The couple would be converting $100,000 per year on top of a $30,000 to $40,000 RMD, plus $49,000 in Social Security. That combined income would put their gross income somewhere in the $179,000 to $189,000 range, likely keeping them within the 22% to 24% bracket rather than pushing into 32% or 35% as originally suggested. The back half of the 10-year plan is more expensive per dollar converted than the front half, which erodes the bracket advantage the 10-year approach was designed to preserve.

The Middle Path

Converting the full amount in six years is not the only option. A more flexible approach sizes each year’s conversion based on how much bracket space is available after accounting for Social Security and any other income.

In the early years when Social Security is the couple’s primary income source, there may be room to convert $150,000 to $175,000 while staying below the ceiling of the 22% bracket.

In later years, if other income rises or tax brackets shift, the conversion amount can be reduced. The goal is not to hit an exact dollar target each year but to fill as much of the lower brackets as possible before 73 arrives and the flexibility disappears.

If the couple cannot convert the entire $1 million before RMDs begin, converting even $600,000 to $700,000 in the six-year window still dramatically reduces future RMDs. A remaining IRA balance of $300,000 produces a much smaller mandatory distribution than a $1 million balance does, which keeps taxable income lower for the rest of retirement and preserves more room for future tax planning.

What This Changes About the Cost Calculation

The original comparison showed a $295,000 federal tax bill for converting all at once versus $110,000 to $130,000 for the 10-year plan. The six-year approach lands somewhere in between, roughly $150,000 to $175,000 in total federal taxes owed, but it eliminates RMDs entirely if the full amount is converted.

Eliminating RMDs does not just save taxes on the distributions themselves. It also keeps the couple’s income lower in their 70s and 80s, which reduces how much of their Social Security is taxed each year, avoids Medicare premium surcharges that are triggered by income spikes, and preserves eligibility for any income-sensitive tax benefits they may qualify for.

Over a 20-year retirement, the cumulative tax savings from avoiding RMDs and keeping Social Security taxation low can offset a significant portion of the higher per-year conversion cost. The six-year plan costs more upfront than the 10-year plan but may cost less over a lifetime when you factor in everything the RMD elimination prevents.

A financial advisor can model both approaches year by year using your actual Social Security income, projected IRA growth, state tax rates and Medicare premium thresholds to show which path produces the lower total tax bill over your full retirement.

Bottom Line

Once you’re 67 or older, you can still convert all or part of your traditional IRA assets to a Roth IRA, but that doesn’t necessarily mean converting everything at once is the right move. Timing matters just as much as the decision itself: assessing your multi-year tax picture, comparing current and future tax brackets, and understanding what window of low-income years you actually have before RMDs kick in can shape which financial strategy makes the most sense for your situation.

That timing question is exactly where the real opportunity lies. “The most optimal time to complete Roth Conversions is during low-income years, which for many retirees occurs before they must take RMDs. How much you convert of your IRA is dependent on numerous factors, some of which include current and future tax brackets, Medicare premium surcharges, and estate planning considerations,” said Matthew Hofacre, MSPFP, CFP®, EA.

Matthew Hofacre, MSPFP, CFP®, EA provided the quote used in this article. Please note that Matthew is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.

Retirement PlanningTips

• A financial advisor can explain how a Roth IRA conversion would impact tax bills, estate planning, healthcare costs and more. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Plug your figures into SmartAsset’s Social Security calculator to get a feel for how much your benefits will be after you retire.

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