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I’ve got 100% of my retirement savings in pre-tax accounts, so Roth conversions definitely make sense for me, up to a point. But the big reason I am interested in them is the potential widow tax hit for me or my wife in our 80’s. And a secondary potential concern about a tax hit for my kids if we we die with a large taxable account balance, since they will have to take 10% out per year on top of their working income in their 50’s.

One contradiction I’ve seen in almost all financial planning discussions around Roth conversions is, on the one hand, they make a huge deal about the low income window right after you retire but before you start collecting SS. But on the other hand, the big pitch for retiring early is to have more “go go years” when you are healthy to enjoy your retirement. Which means front loading travel and other spending in those years. But you can’t have it both ways. You only have a low income window if you are going to be living on *less* than your SS benefit, which means extreme budgeting in the exact time that they say you should be living it up. Assuming a normal or higher than normal lifestyle from 60-67, my taxable income will be the same or higher than it will be once I start collecting SS.

The financial planners all scare-monger about RMDs and throw out huge tax savings numbers, but if you look into it, RMD percentages are pretty low until you get pretty old. They don’t get above 5% until you are 81, and don’t get above 6% until you are 85.

So the RMD risk is that you’ll live inter your 90’s with $2+ million in the bank. Which is, from any objective standpoint other than tax planning, an absolutely fantastic outcome. And yeah, paying a higher tax rate or IRMAA surcharge wouldn’t be great, but it’s also nothing that would make the slightest bit of difference from an actual lifestyle or happiness standpoint if it comes to that. So I’m not super concerned about it.