The Hidden Cost of Waiting on a Roth Conversion

Most people know a Roth conversion can be a smart tax move. What fewer people realize is that the timing of that conversion can be worth tens of thousands of dollars — sometimes more.

Waiting even a few years to act isn't just delaying the benefit. In many cases, it permanently shrinks it.

Why the Window Matters

For many pre-retirees, there's a narrow and often overlooked period between retirement and when required minimum distributions (RMDs) begin at age 73. During this window, taxable income typically drops — sometimes significantly. That creates an opportunity to convert traditional IRA assets to a Roth at a lower tax rate than you'll likely face once RMDs kick in.

But that window closes fast. And the longer you wait, the more compressed your opportunity becomes.

The Real Cost of Waiting

Here's what the delay actually costs you:

1. Your traditional IRA keeps growing — taxably. Every year you wait, your pre-tax balance grows larger. That means a larger eventual RMD, more ordinary income, and potentially more of your Social Security becoming taxable. What felt like "no rush" quietly becomes a larger tax problem each year.

2. You lose years of tax-free compounding. A Roth conversion isn't just about the conversion itself — it's about what that money does afterward. Dollars that grow inside a Roth are never taxed again. Every year of delay is a year of tax-free growth you don't get back.

3. Medicare premiums can spike. Roth conversions increase your modified adjusted gross income (MAGI) in the year of conversion. If you cross certain thresholds, you may trigger IRMAA surcharges on your Medicare Part B and D premiums — often $800 to $3,000 or more per year, per person. Converting strategically across several lower-income years, rather than in one large lump, can help you stay under these thresholds.

4. Your heirs lose too. Under current law, most non-spouse beneficiaries must fully distribute an inherited IRA within 10 years — often during their highest-earning decades. Leaving a large traditional IRA to your children can be an inadvertent gift to the IRS. A Roth they inherit, by contrast, continues to grow tax-free and comes out tax-free.

What a Disciplined Conversion Strategy Looks Like

Rather than converting everything at once — which could push you into a higher bracket — a thoughtful approach converts just enough each year to "fill up" a lower tax bracket without triggering unnecessary costs.

That analysis involves looking at your full income picture: Social Security benefits, RMD projections, capital gains, deductions, IRMAA brackets, and state taxes. It's not complicated once the framework is in place, but it does require a coordinated look across all these moving pieces.

The families who benefit most from Roth conversions aren't necessarily the ones with the largest IRAs. They're the ones who started planning early enough to act when the window was open.

Questions Worth Asking Now

If you have a significant traditional IRA balance, it's worth exploring:

• What will my RMDs look like at age 73 — and how much of my Social Security will become taxable as a result?
• Am I in a lower tax bracket now than I'm likely to be in retirement?
• What are my IRMAA exposure points, and how does a conversion interact with them?
• Who inherits this account, and what tax burden does that create for them?

These aren't hypothetical questions. They're calculations we run for clients regularly — and the answers almost always make the case for acting sooner rather than later.

John Wahl is a CFP® and ChFC® and co-founder of One Bridge Wealth Management, a fee-based independent wealth advisory practice serving high-net-worth families in the St. Louis area. One Bridge Wealth Management acts as a fiduciary when managing assets. This content is for informational purposes only and does not constitute personalized tax or investment advice. Please consult a qualified tax professional regarding your specific situation.