Your Last Paycheck Opens a Window. RMDs Close it.

The last paycheck lands. The next spring, you sit down with your tax return and it's almost empty. For the first time in forty years, you owe next to nothing.

It feels like a reward. It may be the most valuable tax window you'll ever have, and most people drive right past it.

Here's why. At 73 (75 if you were born in 1960 or later), the IRS starts requiring you to take money out of your traditional IRAs and 401(k)s every year. Those are called required minimum distributions, or RMDs. Stack them on top of Social Security, and a lot of careful savers find their taxable income jumping in their mid-70s, right when they expected it to fall. The years between the last paycheck and the first RMD are your chance to move money on your own terms instead.

What a Roth conversion is

A Roth conversion moves money from a traditional IRA into a Roth IRA. You pay income tax on the amount you move, in the year you move it. After that, the money can grow, and qualified withdrawals come out tax-free. A Roth IRA also has no required withdrawals during your lifetime.

You are choosing to pay some tax now, at a rate you can see, instead of later, at a rate you can't.

Why several small conversions usually beat one big one

Federal tax brackets are layered. The first dollars of income are taxed at low rates, and each new layer is taxed higher. Convert $300,000 in a single year and much of it lands in the top layers. Spread the same amount over several years and you can fill the lower layers again and again.

Here's a hypothetical example. A married couple filing jointly has $40,000 of taxable income in 2026. The 12% bracket runs up to $100,800 of taxable income. That leaves them about $60,800 of room to convert before a single dollar reaches the 22% bracket.

The bracket is only the first line on the map

Most people stop at the bracket. The lines that often matter more are the ones nobody mentions.

Medicare surcharges. Once you're on Medicare, higher income triggers an extra premium called IRMAA, the income-related monthly adjustment amount. It's based on your income from two years earlier, so a conversion at 63 can raise your premiums at 65. For 2026 premiums, the first surcharge starts when a joint return's modified adjusted gross income tops $218,000 ($109,000 for single filers). At that first level, each person pays $81.20 more a month for Part B. It works like a cliff: one dollar over the line and the surcharge applies to the whole year.

The 0% capital gains line. If you own investments outside your retirement accounts, some of your long-term gains (profits on things held more than a year) may be taxed at 0%. In 2026, that applies up to $98,900 of taxable income on a joint return. Conversion income counts toward that line and can push gains into a taxable rate.

The senior deduction. Through 2028, people 65 and older can claim an extra $6,000 deduction each. It shrinks once income passes $150,000 on a joint return ($75,000 single). A conversion can quietly take part of it away.

Your state. Michigan and Wisconsin now treat retirement income very differently, and a conversion may count against a state deduction or subtraction. Ask your tax preparer before you convert, not after.

A narrower window than you think

A lot of the retirees I work with in Marquette and Tomahawk left the mill, the hospital or the school district with a pension. That's a gift. It also fills the lower brackets before a single dollar is converted, so the room is smaller and the lines above matter more. Measure the window. Don't assume it.

What to do before December 31

1. Estimate your 2026 taxable income. Last year's return and this year's pay stubs are a good start.
2. Find the lines that apply to you. The top of your bracket. The Medicare line if you're 63 or older. The 0% gains line if you own taxable investments. The senior deduction line if you're 65 or older.
3. Consider converting only up to the lowest line. Not past it.
4. Plan to pay the tax from savings outside the IRA if you can. Paying it from the IRA shrinks what gets to grow tax-free.
5. Finish before December 31. A conversion counts in the year it's completed, and it can't be undone.
6. Talk to your tax preparer first, and plan the next several years together, not just this one.

That quiet tax return isn't empty. It's an open window, and it closes when the first RMD arrives, whether you used it or not.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.