Overview

This case study examines an anonymized, composite client — "Ellen," a retired nurse — who implemented a five‑year Roth conversion ladder between ages 64 and 68. By coordinating conversions with modest part‑time earnings and a small defined‑benefit pension, Ellen materially reduced the traditional‑account balance subject to required minimum distributions (RMDs) once RMDs began at age 73 (per SECURE 2.0). The result: lower projected taxable RMDs in later retirement and more tax‑free flexibility from Roth IRAs.

Client snapshot

  • Age at retirement: 62 (retired in 2023)
  • Primary retirement accounts at retirement: 401(k) from last employer — $360,000; traditional IRA rollovers — $710,000
  • Defined‑benefit pension: modest, $14,500/year (started immediately)
  • Social Security: elected to claim at age 70 for a higher monthly benefit (not the centerpiece of the conversion strategy)
  • Part‑time income: post‑retirement per‑diem nursing work, roughly $10,000–15,000/year
  • Tax filing: single

The problem Ellen faced

Ellen faced two related challenges common to many retirees with large traditional balances: (1) a growing pool of tax‑deferred assets that, if left intact, would drive sizable taxable RMDs starting at age 73; and (2) a desire to preserve tax‑efficient income later in life. Her pension and part‑time wages provided modest cash flow, but left a wide window of lower taxable income between retirement and full Social Security claiming. That window became the conversion opportunity.

Strategy in brief

The strategy had four coordinated elements:

  1. Use the low‑income years between retirement and full Social Security to perform staggered Roth conversions from the traditional IRA and (after an in‑plan rollover) portions of the former 401(k), keeping annual conversions within lower tax brackets.
  2. Fund the tax bill on conversions from a mix of part‑time wages and a taxable brokerage account, avoiding further withdrawals from the converted accounts.
  3. Keep a modest pension stream in place and defer Social Security to age 70 — the pension provided floor income while delaying Social Security increased her lifetime guaranteed income, which reduced pressure to leave traditional balances untouched.
  4. Leave the Roth IRA money untouched to grow tax‑free; Roth IRAs are not subject to RMDs and therefore shrink the taxable base once RMDs start at 73.

Why this fit Ellen’s profile

Ellen’s taxable income opportunity was driven by three facts: she retired before claiming Social Security, she had a small pension to cover essentials, and she planned to do only light part‑time work. Those elements created multiple consecutive years of relatively modest taxable income — ideal years to convert trad‑IRA dollars to Roth while staying within preferential tax brackets.

Concrete actions and timeline (2024–2028)

The adviser and Ellen agreed on a five‑year conversion program beginning in tax year 2024:

  • 2024 (age 64): Converted $45,000 from the traditional IRA to a Roth IRA. Paid tax from brokerage proceeds and $8,000 of part‑time wages.
  • 2025: Converted $55,000.
  • 2026: Converted $50,000.
  • 2027: Converted $40,000.
  • 2028: Converted $30,000 — the final planned conversion to complete the ladder.

Total converted over five years: $220,000. Conversions were sized each year to fill the lower tax brackets but avoid pushing Ellen into the highest marginal band for singles. The adviser monitored taxable income carefully to preserve eligibility for tax credits and to avoid unintended Medicare IRMAA triggers.

Operational notes: 401(k) vs. IRA

Because much of Ellen’s retirement balance was already in a traditional IRA, conversions flowed directly from the IRA to the Roth IRA. The remaining 401(k) of $360,000 was partially rolled into an IRA in 2025 to consolidate and simplify conversions. The team prioritized converting IRA dollars first because the 401(k) contained employer‑stock carryovers and a small outstanding loan; the rollover allowed those particular complexities to be resolved before conversion.

Cash flow and tax funding

A key to success was funding conversion taxes without touching the converted Roth money. Ellen sold holdings in a taxable brokerage account and used roughly $10,000–$20,000 per year of her per‑diem nursing income. This approach preserved the full effect of tax‑free growth inside the Roth IRA.

Outcomes by age 73 (first RMD year)

By the time Ellen reached the RMD age of 73, her traditional‑account balance had been reduced by the $220,000 of conversions. Assuming conservative market returns and steady pension payments, the projected taxable RMDs at 73 were roughly 25–35% lower than they would have been without the conversions.

More importantly, the Roth IRAs provided tax‑free withdrawal flexibility later in retirement, which allowed Ellen to:

  • Draw from Roths during years with elevated taxable income (e.g., large medical expenses, unexpected capital gains), keeping taxable income and future RMDs more manageable;
  • Leave a larger tax‑free legacy to heirs, since Roth IRAs are inherited differently from traditional IRAs; and
  • Smooth taxable income in late 70s and 80s when Medicare and other age‑related costs often rise.

Lessons and takeaways for retirement‑planning enthusiasts

  • Timing matters: The years between retirement and full Social Security are often the best window for Roth conversions because taxable income tends to be lower.
  • Fund taxes from outside the converted accounts: Using taxable assets or earned income to pay conversion taxes preserves the full tax‑free growth benefit inside the Roth.
  • Size conversions to the tax bracket: A staged ladder that keeps conversions within lower tax brackets delivers better after‑tax results than lump conversions that push taxpayers into higher rates.
  • Coordinate with guaranteed income: A modest pension or other guaranteed income can provide stability while conversions proceed; Social Security timing is one lever among many (but not always the linchpin).
  • Account structure matters: Consolidating 401(k) and IRA assets before conversions can simplify the process, but watch for plan restrictions, employer stock, or outstanding plan loans that complicate rollovers.
  • Roth IRAs reduce future RMD burden: Because Roth IRAs are exempt from RMDs (for original owners), converting a portion of traditional balances reduces the taxable base subject to future RMDs.

Caveats and what could go wrong

This approach isn’t universally optimal. Risks include:

  • Conversion taxes accelerating into a high‑income year if wages or capital gains spike unexpectedly;
  • Medicare IRMAA surcharges triggered by higher reported income in conversion years;
  • Regulatory changes — tax law changes could affect the value of Roth conversions; keep plans adaptable;
  • Behavioral risk — using converted Roth funds prematurely can erode the intended RMD relief.

Bottom line

Ellen’s five‑year Roth ladder is a clear example of using a modest post‑retirement income floor, careful tax‑planning, and staged conversions to reshape the taxable architecture of retirement. By converting $220,000 over five years, funding taxes from outside sources, and preserving a small pension and delayed Social Security, she reduced projected taxable RMDs at age 73 and gained tax‑free flexibility later in life.

Every retiree’s numbers differ — account sizes, pension amounts, and Social Security timing change the calculus — but the central lesson remains: look for low‑income windows after retirement to perform targeted Roth conversions, and coordinate funding of conversion taxes so the Roth can compound undisturbed.

Note: This article discusses an anonymized, composite client case based on typical real‑world situations. It is illustrative, not prescriptive. Readers should consult a tax advisor or certified financial planner before enacting Roth conversions or account rollovers.