A Roth conversion strategy from Tolleson Wealth Management

At 60, Tolleson Wealth Management looks for the years that stay cheap

In practice, a conversion schedule says how much pretax money moves to a Roth each year and treats that amount as ordinary income that year. Ten to 15 years out, the choice is often Roth 401(k) deferrals and Roth catch-ups because wages already use much of the bracket. The work starts when lower-income years open after a last paycheck and before pension income, Social Security, and RMDs at 73, or 75 for people born in 1960 or later. Darnell left work at 62 while Fatima still works part time, so their gap is open now.

Should we convert before pension and Social Security checks begin?

Convert before pension and Social Security income begin only when the dollars moved this year are likely to face a lower tax rate than they would after pension income, two Social Security checks, and RMDs begin. For joint filers nearing Medicare, the 2026 standard Part B premium line is $218,000 of MAGI.

Converting by habit, or choosing a headline dollar amount, misses the real issue: what later income will do to each bracket. The quick test is to compare this year's rate on the converted slice with the likely rate once the pension, Social Security, and RMDs arrive. Convert only the slice where today's rate is lower. If the later rate looks equal or lower, conversion usually does not pay; check current bracket edges with the IRS each year.

Several dates make the question more urgent. The IRS allows a higher $11,250 catch-up at ages 60 through 63 for 2026, if the workplace plan offers a Roth option. When prior-year FICA wages exceed $150,000, that catch-up must be Roth. Medicare begins at 65, and the IRMAA surcharge is set by the tax return filed for the year two years before. Darnell's conversion at 63 is the one that sets his first Medicare premium. A conversion must finish by December 31. Both spouses reach RMDs at 75, leaving a long window.

Find the row closest to your current stage first; the usual move changes once retirement gets near enough to map pension and Social Security income.

For illustration, Fatima, 60, has an $80K traditional IRA from an earlier bookkeeping job, separate from Darnell's $900K 401(k). Before his pension and Social Security begin, assume their income falls in a 12 percent bracket; afterward, assume 22 percent. She converts $20K annually for four years. $20K × 12 percent equals $2,400 of tax annually. $2,400 × four years equals $9,600, paid from savings. At 22 percent later, $80K × 22 percent equals $17,600, or $8,000 more. Assuming 5 percent a year, for illustration, $80K grows to about $158K in 14 years. The 10-point tax gap on $158K is about $15,800. No six-figure IRA is needed. The Roth account can still fall below the amount converted after the tax has already been paid.

Conversions often are not worth using if tax must come from the IRA itself, you expect to spend the money within a few years, or you expect a lower bracket later, such as by giving through qualified charitable distributions after age 70½.

Which answers show a firm can run a Roth conversion strategy well?

A firm can run a Roth conversion strategy well when it projects each year around your pension election, Social Security timing, tax payment source, and Medicare threshold. A firm that names one conversion amount for every year has not done that work. Tolleson Wealth Management asks for written figures, such as the pension election letter and Social Security estimates, before it calculates a range.

A firm that gives the same conversion number every year without asking about the pension election has not done the projection.

• Does it model the $400K lump sum or monthly pension check and each claiming age, year by year?
• How does it watch the IRMAA line two years before Medicare?
• Where will tax money come from, and what brokerage gains might a sale create?
• How is the firm paid, and would a conversion or account move change that payment?

Three decisions a Roth conversion changes before 67

Retirement income planning uses the same bracket room as a conversion, because each year's moved amount competes with the monthly paycheck. If Darnell waits until 70 to claim Social Security, the lower-income window can last three more years. A 401(k) rollover to an IRA puts his $900K 401(k), plus a $400K pension lump sum if chosen, into the pool used for conversions; Roth 401(k) dollars move to a Roth IRA.

Five checks that size each year's conversion

Tolleson Wealth Management puts the conversion number beside spending, not in a separate tax file. A flexible spending playbook sets a guardrail floor for the monthly paycheck, then allows spending to rise or trim as markets move.

1. You send paperwork: the latest tax return, 401(k) and IRA statements, the pension election letter showing the $400K lump sum and monthly amount, plus Social Security estimates.

2. We project taxes each year through age 75 under both pension choices. That shows where a low-rate slice may exist and when the window closes.

3. We set a ceiling for each year at the top of the chosen bracket, staying below $218,000 of joint MAGI beginning with the year Darnell turns 63.

4. We decide whether cash or a brokerage account pays the tax and check that the payment does not take the monthly paycheck below the guardrail floor.

5. We wait to process the conversion until October or November, when pension, wage and capital-gain figures are close to final, and complete it by December 31. At the annual meeting, we recheck the amount. In a down year when guardrails trim spending, the same conversion dollars move more shares into the Roth, so we may suggest a somewhat larger conversion.

Can I leave the first Roth conversion meeting with a number for this year?

Yes, Tolleson Wealth Management can give you a conversion range for this year and next after a screen-share video call or phone call, provided your tax figures, account statements, pension choices, and Social Security estimates are available. The final amount waits until income for the year is clearer.

The discussion starts with two questions: which pension option is available, and which claiming age each spouse is leaning toward. We review the paperwork, identify open items such as a pension-election deadline, and explain in writing how the firm is paid before any account moves.

The three-page playbook follows after the projections are complete. It lists yearly conversion amounts through the RMD start age, the tax-payment source, and the items to revisit at the annual meeting. Tolleson Wealth Management has a $500K investable-asset minimum. The request form at tollesonmanagement.com is available when you are ready to share the basics.