Roth Conversions at 22% Beat Year-End Tax Rush, Adviser Says

Rushing to cut taxes in December often raises the total bill over a lifetime of retirement, advisers say.

Tax planning that targets December deadlines often raises the total bill over 20 to 30 years of retirement, because it fails to spread withdrawals across brackets year after year, advisers say.

"Most of my clients hate paying taxes," said Nick Bare, a principal and wealth adviser at Linscomb Wealth. "But the instinct to avoid taxes today often leads to paying significantly more of them tomorrow."

Bare flags four strategies that require years, not months, to deliver. Roth conversions in the low-income window before claiming Social Security — typically five to 10 years — can move IRA or 401(k) money at the 12% or 22% bracket rather than the 32% or higher rate that may apply once Social Security and required minimum distributions begin. Bunching charitable deductions into high-income years, timing inherited IRA withdrawals within the SECURE Act's 10-year window, and spreading embedded capital gains over two or three tax years round out the list.

The cost of waiting is concrete. A couple retiring at 60 with $1.5 million in traditional 401(k) balances has roughly four tax years, ages 60 through 63, to convert before Medicare's two-year IRMAA lookback turns higher income into permanent premium surcharges, per the 2026 Part B schedule. Converting about $110,000 to $115,000 annually keeps a couple inside the 22% bracket and under the $218,000 married-filing-jointly IRMAA threshold, moving roughly $450,000 at a blended federal rate near 18%.

December Deadlines Cost More Than They Save

Waiting until the fourth quarter limits both logistics and flexibility. Custodians cannot guarantee that qualified charitable distributions, donor-advised fund contributions or Roth conversions will settle before year-end if executed late in December, Bare said. A missed deadline is a penalty, not a strategy.

Timing also matters for gifting appreciated shares. Gifting 10 shares at $80 versus $88 per share — a 10 percent move that translates directly into a larger charitable deduction — is an opportunity only captured by watching throughout the year, he said.

Four Moves That Need Years, Not Months

Roth conversions in the low-income window are the highest-value move for many retirees. The 2026 standard deduction for married filing jointly is $32,200, and the 22 percent bracket ends at $100,800 of taxable income, with the 24 percent bracket running to $211,400. A retired couple with modest interest and dividend income can convert roughly $110,000 to $115,000 per year and stay inside the 22 percent bracket, with total modified adjusted gross income under the $218,000 IRMAA floor. These figures reflect the 2026 tax schedule and should be verified against the latest IRS and Medicare announcements.

Leave that $450,000 in the traditional account instead, grow it at even a conservative rate against a 10-year Treasury near 4.7 percent, and by the time RMDs begin at 73 it becomes closer to $800,000 of forced ordinary income layered on top of Social Security, pushing retirees into the 32 percent bracket and higher IRMAA tiers simultaneously.

Coordinated charitable giving works best when bunched into a high-income year, such as one marked by a large Roth conversion or portfolio rebalance. Inherited IRA management under the SECURE Act requires deciding when within the 10-year depletion window to take distributions — delaying until after retirement can shift them into lower tax years. Portfolio transitions with embedded gains are best spread over two or three tax years rather than triggered all at once.

Three steps before next tax season: pull the 2025 tax return and look for surprises, identify irregular income on the horizon such as equity compensation or a business sale, and organize prior returns, IRS PINs, cost basis records and charitable contribution receipts before they are needed.

Paying capital gains taxes is not inherently bad — it means investments have grown. The risk of holding a concentrated position that may no longer outperform can outweigh the tax cost of diversifying, Bare said.

This content is for informational reference only and does not constitute professional advice.