Should I Convert My 401k to Roth at 60? Complete Analysis
The 5-7 years before retirement can be the perfect time for Roth conversion—or a costly mistake. Here's how to decide.
Key Takeaways
- 1Ages 60-70 can be ideal for Roth conversions due to lower income years
- 2Converting before RMDs start (age 73) preserves more tax-free growth
- 3You need 5+ years for conversions to break even vs staying traditional
- 4Convert in years when your income (and tax rate) is unusually low
- 5Large conversions can trigger Medicare IRMAA surcharges
- 6Partial conversions over multiple years often beat one large conversion
- 7Consider state taxes—some states don't tax retirement income
Why Age 60 Can Be the Perfect Time
The years between 60 and 73 offer a unique window for tax planning. Here's why this period is often ideal for Roth conversions:
- Early retirement: May have years with little or no earned income
- Before RMDs: RMDs start at 73—convert before forced distributions
- Tax bracket optimization: Fill up lower brackets before Social Security starts
- Long enough horizon: 5+ years before you may need the money
- Employer coverage: May still have employer health insurance (pre-Medicare)
- Legacy planning: Tax-free inheritance for beneficiaries
The Conversion Math: Will It Pay Off?
The key question is whether paying tax now at your current rate beats paying later at your future rate. Here's a simplified example:
| Scenario | Traditional 401k | Roth Conversion |
|---|---|---|
| Starting Amount | $500,000 | $500,000 |
| Tax Paid Now (24%) | $0 | $120,000 |
| Amount After Tax/Conversion | $500,000 | $380,000* |
| Growth at 7% for 10 years | $983,575 | $747,518* |
| Tax at Withdrawal (24%) | $236,058 | $0 |
| Net After-Tax | $747,517 | $747,518 |
| Break Even | ~10 years if rates stay same |
Smart Conversion Strategies at 60
Don't convert everything at once. Strategic partial conversions usually work better:
- Bracket filling: Convert just enough to fill your current tax bracket
- Gap years: Convert more in years between retirement and Social Security
- ACA planning: Keep income under ACA subsidy thresholds if on marketplace
- IRMAA awareness: Stay below Medicare premium surcharge thresholds
- State strategy: Time conversions if moving to a no-income-tax state
- Spread over years: Multiple smaller conversions beat one large conversion
| Tax Bracket (2025) | Single Income | Married Filing Jointly |
|---|---|---|
| 10% | Up to $11,925 | Up to $23,850 |
| 12% | $11,926 - $48,475 | $23,851 - $96,950 |
| 22% | $48,476 - $103,350 | $96,951 - $206,700 |
| 24% | $103,351 - $197,300 | $206,701 - $394,600 |
| 32% | $197,301 - $250,525 | $394,601 - $501,050 |
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Conversion Pitfalls to Avoid
These mistakes can turn a smart strategy into a costly error:
- Converting too much: Pushing into higher brackets negates the benefit
- Ignoring Medicare IRMAA: High income triggers 2-year premium increase
- Forgetting state taxes: Some states tax conversions, others don't
- Using retirement funds for tax: Pay tax from non-retirement money
- Converting when rates will drop: If you expect lower rates later, wait
- Ignoring the 5-year rule: Each conversion has its own 5-year clock
Who Should Convert at 60?
Roth conversion at 60 makes sense if you meet several of these criteria:
- You're in a lower tax bracket now than you expect in retirement
- You have non-retirement funds to pay the conversion tax
- You don't need the money for at least 5 years
- You expect tax rates to increase in the future
- You want to reduce future RMDs
- You want to leave tax-free money to heirs
- You're moving to a no-income-tax state
Who Should NOT Convert at 60?
Roth conversion may be a mistake in these situations:
- You're currently in a high tax bracket
- You'll be in a lower bracket in retirement (rare but possible)
- You need to use retirement funds to pay conversion tax
- You might need the money within 5 years
- You're charitably inclined (traditional has better QCD benefits)
- You live in a high-tax state and plan to stay
- Large conversion would trigger Medicare IRMAA
The IRMAA Trap
Medicare premiums increase with income through IRMAA (Income-Related Monthly Adjustment Amount). A large Roth conversion could push you into higher premium tiers for two years. The thresholds start at $103,000 (single) and $206,000 (married) for 2025.
Diversification Beyond Tax Strategy
While Roth conversions address tax diversification, they don't address asset class diversification. Consider adding gold to your retirement strategy:
- Gold IRA offers tax-deferred or tax-free growth (traditional or Roth)
- Physical gold provides hedge against inflation and market volatility
- Not correlated with stocks—true portfolio diversification
- Can roll over portion of 401k to Gold IRA without conversion tax
- Tangible asset that has held value for thousands of years
Frequently Asked Questions
1Can I undo a Roth conversion if I change my mind?
No, since 2018 Roth conversions are irreversible. The Tax Cuts and Jobs Act eliminated recharacterization of conversions. Think carefully before converting.
2What's the 5-year rule for Roth conversions?
Each Roth conversion has its own 5-year waiting period before you can withdraw those funds penalty-free (if under 59½). This is separate from the 5-year rule for earnings. At 60+, this matters less since you're already past 59½.
3Should I convert my entire 401k to Roth?
Almost never. Having both traditional and Roth accounts gives you tax flexibility in retirement. Some traditional funds allow you to stay in lower brackets, use QCDs, and avoid IRMAA triggers.
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