The Golden Window

Taxes in Retirement

There's a stretch of years in almost every retirement where something strange happens.

The paycheck stops. Social Security hasn't started. The IRS hasn't forced you to touch your retirement accounts yet.

For the first time since you were a teenager, your taxable income is close to zero.

Most people look at those years and celebrate the tiny tax bill. "Look how little we paid this year!"

That's exactly backwards. Those years aren't for celebrating a small tax bill. They're for deliberately CREATING a bigger one, on your terms, at the lowest rates you will ever see again.

Let me explain, because this window closes at 73 and it does not reopen.

The freight train at 73

Every dollar in your Traditional 401k and IRA is a dollar the IRS hasn't taxed yet. They've been patient. At age 73 (75 if you were born in 1960 or later), they stop being patient.

Required Minimum Distributions begin. The IRS tells you how much to withdraw, whether you need the money or not, and taxes every dollar as ordinary income.

Here's what that looks like in practice. A couple retires at 62 with $1.5M in Traditional IRAs. They spend from savings, take Social Security at 67, and never touch the IRAs because "why pay tax before we have to?"

By 73, growing at 7%, those IRAs are worth roughly $3.1M. Their first RMD is about $117,000. Stacked on top of two Social Security checks, they're suddenly in the 24% bracket, their Medicare premiums jump because of income surcharges, and up to 85% of their Social Security is now taxable.

They spent a decade in the 10-12% bracket doing nothing, then got shoved into 24%+ for the rest of their lives.

The tax bill was always coming. The only question was whether they'd pay it at 12% or 24%.

The Golden Window play

The move is a Roth conversion: shifting money from your Traditional IRA to a Roth IRA, on purpose, during the low-income years.

You pay ordinary income tax on whatever you convert, this year. In exchange, that money and ALL its future growth comes out tax-free forever. No RMDs on Roth IRAs. Ever.

The strategy isn't converting everything at once. It's filling the low brackets each year, deliberately, like pouring water to a line.

A married couple with no other income in 2026 can recognize roughly $133,000 and stay inside the 12% bracket after deductions. Do that for 8 to 10 gap years and you've moved $1M+ out of the IRS's reach at rates you'll never see again.

A $100,000 conversion growing at 7% for 25 years becomes over $540,000 of completely tax-free money. That's one year's conversion. The window gives you ten.

Why Texas retirees get the best version of this

Here's a fact that matters if you're reading this from Texas: Roth conversions are taxed where you live when you convert.

A retiree in California pays up to 13.3% state tax on top of federal for every converted dollar. A New Yorker, up to 10.9%.

A Texan pays zero state tax. The exact same conversion costs a Texas retiree thousands less per year than it costs almost anyone else in America. The Golden Window is open everywhere. It's just wider here.

The new wrinkles for 2026

Two things changed recently that affect the math.

First, the new senior deduction. If you're 65 or older, there's an extra $6,000 deduction per person ($12,000 per couple) available through 2028. It phases out between $150K and $250K of income for couples, and conversion income counts toward that phase-out. Convert too much in one year and you can vaporize the deduction. Convert smart and the deduction absorbs part of the conversion. This is a four-year window inside the window.

Second, Medicare's income surcharge (IRMAA). Once you're 63+, conversions show up in your Medicare premiums two years later. Cross an income threshold by ONE DOLLAR and your premiums can jump by over $1,000 per year, per person. The thresholds are cliffs, not ramps.

This is why "just fill the 22% bracket" advice from a YouTube video isn't a plan. The real ceiling for your conversion is wherever your bracket, the senior deduction phase-out, and the IRMAA cliffs intersect. That number is different for every household and every year.

The sequence

1. Project your RMDs at 73. Take your current Traditional balances, grow them at 6-7%, divide by roughly 26.5. If that number stacked on Social Security lands you in a higher bracket than today, the window matters for you.
2. Map your gap years. Retirement date to Social Security date to RMD date. Every year in that gap is conversion capacity. Delaying Social Security to 70 widens the window AND raises your benefit. The strategies compound.
3. Find your ceiling for this year. Bracket top, IRMAA threshold, senior deduction phase-out. Convert up to the lowest of the three.
4. Pay the conversion tax from cash, never from the IRA itself. Paying from the IRA shrinks the amount that gets to grow tax-free and can trigger penalties under 59 and a half.
5. Repeat every year the window is open. This is not a one-time decision. It's an annual discipline.

The mistakes that close the window early

Waiting for "someday." Every gap year that passes without a conversion is bracket space you lose forever. It doesn't roll over.

Converting a huge lump in one year. One $500K conversion can land in the 35% bracket and spike two years of Medicare premiums. The whole point is pacing.

Ignoring the two-year Medicare lookback. The conversion you do at 63 sets your premiums at 65. Most people find this out from a letter, after it's too late.

Assuming your CPA is watching this. Your CPA files last year's return. This is a forward-looking, ten-year modeling exercise. Different job. Someone has to own it.

The Golden Window opens once, stays open for about a decade, and closes for good at 73.

Most people never even know they were standing in it.