Roth Conversions: What Gen X Needs to Know

If you are in your late 40s or 50s, you are standing in one of the most important tax planning windows of your life. The decade between your peak earning years and the start of required minimum distributions is when Roth conversions can quietly reshape the next 30 years of your retirement.

A Roth conversion is simply moving money from a pre-tax retirement account — a Traditional IRA or old 401(k) — into a Roth IRA. You pay ordinary income tax on the amount you convert today, in exchange for tax-free growth and tax-free withdrawals later. No required minimum distributions. No surprise tax bills in your 70s. No tax bomb left behind for your kids.

The strategy works best when your current tax bracket is lower than the bracket you expect to be in later. For many Gen X households that is true in two windows: gap years between retirement and Social Security, and any year a spouse stops working. Bracket-filling — converting just enough to top off the 12% or 24% bracket without spilling into the next — is the cleanest way to use those windows.

Common traps: paying the tax bill out of the IRA itself (you lose the tax-free runway on that money), forgetting that conversions count toward IRMAA brackets for Medicare premiums, and converting in a year a big capital gain or bonus already pushed you up. A multi-year plan, not a one-time decision, almost always wins.

If you are within ten years of retirement, this is the conversation to have now — not at 72.