Looking for feedback on my Roth conversion strategy before I retire.
I'm planning to retire in two years at 61 (June 2028) and would appreciate feedback on my plans for a Roth conversion strategy.
Current situation:
- Me: 59 Approximately $200k Salary
- Spouse: approximately $220k salary will retire same year as me at age 60.
- Net worth: ~$5.6M
- Investable assets: ~$4.7M
- Mortgage: $260k at 2.25%, MCOL
- Current spending: average about $12k/month including fixed expenses and discretionary spend.
Portfolio is roughly:
- $3.8M tax-deferred
- ~$900k taxable brokerage
- Small Roth balances
- Real estate equity makes up the remainder of net worth.
- We recently rebalanced to a conservative portfolio in anticipation of retirement. Approximately 10% Money Market/50% VTSAX/ 40% Bonds. I know that's a lot of cash (due to a recent property sale). But we have it both as dry powder but also for emergency fund and sequence risk protection.
Current plan is:
- Retire at 61.
- Delay Social Security until 70.
- Use the taxable brokerage account as the bridge during early retirement.
- ACA Silver until medicare age is reached ($2.1k/month no subsidies due to conversions).
- Perform Roth conversions in early 60s while trying to stay within the 24% federal bracket.
- The goal of the conversions is to reduce future RMDs and to avoid larger lifetime taxes and also to leave a tax efficient legacy to our two adult children/future grandchildren (ie. large remaining Roth balances at the end).
Important additional details. 1.) I am at 50% pay for 2026-2027 starting in September for a sabbatical. This leaves some space for conversions. 2.) we have 3 workplace deferred tax retirement accounts (403b, 457b, 401k) between us so we can contribute 3X 24500 pretax. So this reduces AGI leaving space in 24% bracket for conversions while still contributing and working. We are doing catchup contributions to Roth due to recent tax law changes.
I've been using projection lab to run various optimizations for our retirement planning scenarios. The "Maximizing net worth" optimization seems to produce the best outcome, it leaves some RMDs, and reduces overall lifetime taxes and gives a nice projected boost to net worth. It recommends about $1.1M of Roth conversions through about age 63 (avoiding IRMAA). then more later when spending goes down in no-go years.
My question is:
- Is it actually worth it??!! I see that it makes sense on paper, but that initial tax bill during conversions is going to be painful.
- Also, a big concern is that the Roth conversion strategy consumes a large portion of our taxable brokerage account because I'd be paying the conversion taxes from there. Again, paying those huge tax bills in our early 60s is going to be painful. But I guess less painful than the huge bills will be in later life? I understand that it's critical to avoid withholding taxes from the tax deferred accounts, but it will be hard to watch the bridge account shrink fast during the actual time it's supposed to fund early years of retirement, and protect from sequence risk. Does it really make sense to maximize lifetime after-tax wealth or would you preserve a larger taxable account bridge for flexibility and peace of mind?
- For those who have actually gone through large Roth conversion strategy, is there anything you wish you had considered before pulling the trigger?
Not sure if age 61 still even counts as RE. Hope this sub is the right place for this!