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# Did We Wait Too Long?
- URL: https://phil.cpa/did-we-wait-too-long/
- Published: 2026-09-30T14:36:59.000Z
- Updated: 2026-09-30T14:36:59.000Z
- Author: Phil Gaudiano
- Tags: IRMAA & RMDs

Richard slid a printout of my Roth window piece across the table before Joan had even sat down.

"We read this," he said. "We're 75 and 73\. The window closed years ago, didn't it?"

It's a fair question, and I've heard some version of it several times in the past few months. Richard retired from an engineering firm at 64\. Joan left teaching a year later. They spent the decade between retirement and their first required distributions the way most careful people do. They lived on savings and Social Security, and they left their IRAs alone because it felt responsible.

They now have about $1.3 million in traditional IRAs, $900,000 in Richard's and $400,000 in Joan's, and about $62,000 a year in Social Security. Joan may be entering her first RMD year. Richard has likely already been subject to RMDs for a year or two, depending on his birth year. Either way, the forced withdrawals are no longer on the horizon. They're on the tax return.

The window did close. The planning didn't.

### What the window was, and what's left

The [gap years](https://phil.cpa/i-wish-id-known-this-at-65/) are the stretch between retirement and the start of required minimum distributions (RMDs, the amounts the IRS makes you withdraw from pre-tax accounts each year). RMDs begin at 73 or 75, depending on your birth year. Anyone born in 1960 or later starts at 75\. During the gap years, your taxable income is often as low as it will ever be again. That's the ideal time for Roth conversions, where you move money from a traditional IRA to a Roth IRA and pay tax on it now so it grows and comes out tax-free later.

Once RMDs start, the math changes. Richard and Joan now have a floor of taxable income they can't turn off. Richard's RMD this year is about $36,600, and Joan's is about $15,100\. That's roughly $51,700 of income that shows up whether they need it or not, stacked on top of Social Security. One wrinkle for Joan: in her first RMD year, she can wait until April 1 of the following year to take it. Waiting means two RMDs land in the same tax year, though, which usually makes the bracket problem worse, not better.

So the question is no longer how to fill the cheap brackets while they're empty. The question is how much room is left once you count the forced income, and whether using that room still pays off. For many people it still does, but you have to follow the rules in the right order and watch the thresholds closely.

### The first dollars out are always the RMD

This rule causes more trouble than any other. In any year you owe an RMD, the IRS treats the first dollars you withdraw from your IRA as that RMD. You can't convert an RMD to a Roth, because RMDs aren't eligible to be rolled over.

Say Richard converts $40,000 in February before taking his RMD. The IRS treats the first $36,600 of that conversion as his RMD, which is taxable income that can't legally go into a Roth. That money is now an excess contribution sitting in his Roth IRA, and it owes a 6% penalty every year until it's corrected. He still owes the full RMD tax, and the conversion he meant to make largely didn't happen.

The fix is simple: satisfy the RMD first, then convert. It doesn't have to be the same day or even the same quarter. It just has to come first in the calendar year.

### The QCD: the one lever that lowers the floor

Richard and Joan give about $15,000 a year to their church and a local food bank, and they write the checks from their checking account. Like most retirees, they take the standard deduction, so those gifts don't reduce their taxes at all.

A qualified charitable distribution (QCD) changes that. A QCD is money sent directly from your IRA to a qualified charity once you're 70½ or older. It counts toward your RMD, and it never shows up in your adjusted gross income (AGI, the income figure that drives most of the rest of your tax return). In 2026, each IRA owner can send up to $111,000 this way.

For Richard and Joan, the effect is larger than $15,000\. Up to 85% of Social Security becomes taxable as other income rises. At their income level, every extra IRA dollar also pulls about 85 cents of Social Security into taxable income. That works in reverse too, so every dollar a QCD removes takes 85 cents of taxable Social Security with it.

A note before the numbers: All dollar examples in this piece are approximate and should be verified with a tax projection, because Roth conversions can affect Social Security taxation, senior-deduction phaseouts, and IRMAA. Those interactions are the whole point of this piece, and they're also why a small change in income can move the result more than you'd expect.

Here is their 2026 return with and without a $15,000 QCD from Richard's IRA:

- **Writing checks:** AGI of $99,845, federal tax of $5,785
- **Giving through a QCD:** AGI of $72,095, federal tax of $2,460
- **Difference:** AGI drops by $27,750, and tax drops by $3,325 on the same $15,000 of giving

They give the same amount to the same causes and pay about 58% less federal tax. If you give to charity and you're past 70½, this is almost always the first move.

### Using both in the same year

This is the part that's been coming up in my recent conversations. You can do a QCD and a Roth conversion in the same year, and for charitably inclined retirees the two work well together.

Put the QCD first. It counts toward the RMD, and it has to happen before the conversion for the first-dollars-out rule to work in your favor. Then take whatever is left of the RMD. Then convert into the remaining room.

The QCD lowers the floor, which creates more room above it. Without a QCD, Richard and Joan can convert about $38,900 before they reach the top of the 12% bracket (taxable income of $100,800 for a married couple in 2026). With the $15,000 QCD, that room grows to about $53,900.

The 12% bracket isn't really 12% for them, though. The same Social Security effect that made the QCD so valuable works against the conversion. Converting $53,900 pulls the rest of their Social Security into taxable income, so the conversion costs about $9,140, an average of 17%. That's still a good rate, but it's not the rate you'd guess from a bracket chart. For anyone collecting Social Security, the bracket chart understates the real cost of the first dollars you convert.

Above the 12% bracket, the next rate is 22%, and in 2026 it's a little higher than that. The new senior deduction (an extra $6,000 per person age 65 or older, available through 2028) phases out once a couple's AGI passes $150,000\. That makes the effective rate on conversion dollars in that range about 23%.

Next is IRMAA, the Income-Related Monthly Adjustment Amount, a surcharge on Medicare premiums for higher earners. For a married couple, the first IRMAA tier starts at about $218,000 of modified AGI in 2026 terms. It's based on your income from two years earlier, so a conversion this year sets your premiums two years from now. It's also a cliff. Going over by one dollar triggers the full surcharge for both spouses. With the QCD, Richard and Joan could convert about $122,000 before they get close to that line, at an average cost of about 20.5%.

The room is there. The real question is whether they should use it.

### Where the lifetime savings actually come from

A conversion pays off when the tax you pay now is lower than the tax that money would face later. For a couple in their mid-70s, "later" usually means one of two things.

The first is the survivor years. When one spouse dies, the other files as single the next year. The tax brackets roughly halve. The IRMAA thresholds halve. The income mostly doesn't. The survivor keeps the larger of the two Social Security checks and inherits the whole IRA, along with the RMDs that come with it.

Picture Joan at 83, widowed, with $1.1 million still in the IRA after a decade of distributions and conversions. Her RMD is about $62,100\. Her Social Security is about $38,000\. Filing single, and with the senior deduction long expired, her taxable income is about $81,300\. That puts her squarely in the 22% bracket, and her AGI of about $99,400 is close to the single-filer IRMAA line of $109,000.

That's the comparison that matters. The dollars Richard and Joan convert inside the 12% bracket today, at an average of about 17%, would otherwise be taxed to Joan at 22% or more. That savings is real, and it holds up year after year. The dollars they could convert in the 22% bracket, at about 23% today, would face roughly the same rate in Joan's hands, so converting them is closer to a wash.

The second is the heirs. Under current rules, most non-spouse beneficiaries have to empty an inherited IRA within ten years. That money usually lands on top of their own salaries in their peak earning years, often at 24% or 32%. An inherited Roth comes out tax-free. If the kids are high earners, converting in the 22% bracket today starts to look like a bargain.

So the picture for a couple who missed the gap years is more measured than the gap-year story. Filling the 12% bracket each year, made larger with QCDs, is usually worth it. Going further into the 22% bracket depends on the survivor projection and the heirs' tax brackets. Crossing an IRMAA line rarely makes sense unless the conversion is large enough to justify a year of higher premiums. The savings are smaller than they would have been at 65, but they add up over ten or fifteen years.

### What to do if you missed the gap years

1. **Project the survivor years first.** Before you convert anything, model how your taxable income will change when one spouse is gone. That projection tells you what rate you're actually trying to beat. If the survivor lands in the 12% bracket, late conversions may not be worth much. If the survivor lands in the 22% or 24% bracket, they almost certainly are.
2. **Move your giving into QCDs.** If you give to charity, send it straight from your IRA. The money has to come from an IRA, not a 401(k), so consider rolling old workplace plans into an IRA after taking that year's RMD from the plan. QCDs can't go to donor-advised funds. Your custodian will usually report a QCD as an ordinary distribution on Form 1099-R, so make sure your tax preparer marks it as a QCD on the return. Otherwise, you'll pay tax on money you gave away.
3. **Do things in order.** QCD first, then the rest of the RMD, then the conversion. It's often best to convert late in the year, once you know your actual income. Since 2018, there's no way to undo a Roth conversion, so a conversion made in March based on an income estimate is a conversion you're stuck with.
4. **Pick your ceiling on purpose.** Decide which threshold you're managing to each year: the top of the 12% bracket, the $150,000 senior-deduction phaseout, the IRMAA line, or the top of the 22% bracket. Each one fits a different situation. The mistake is not choosing one and letting the conversion amount land wherever it lands.
5. **Pay the tax from outside the IRA.** Paying conversion tax from a taxable account leaves more money growing tax-free in the Roth. If you need the IRA to cover the tax, withhold it from the RMD instead of the conversion. That keeps the full conversion amount in the Roth.
6. **Revisit every year.** RMDs rise as you age, market values shift, and tax laws change. The senior deduction ends after 2028\. Treat this as an annual decision, not a one-time plan.

Richard folded the printout and put it back in his jacket. "So we didn't miss it," he said. "We just missed the easy version."

That's right. The gap years are the easy version. After them, it's the same work done more carefully with less room, and it can still add up over the years that remain. Take the RMD first, give from the IRA, and convert only into the room you've chosen on purpose. Do it in that order each year, and the savings follow.

---

*Thanks for reading The Pensioner's Paradox. I write weekly on retirement income, tax planning, and the structural side of retiring with confidence. If this piece resonated, subscribe at* [*phil.cpa*](https://www.phil.cpa/?ref=phil.cpa) *to get new pieces in your inbox. If you would like to talk through how these ideas apply to your own situation, you can reach me at phil.cpa.*

*If you're already taking RMDs and wondering whether conversions still make sense for you, the answer depends on your own survivor projection and your family's brackets. That's exactly what a tax plan is built to answer, and you can reach me at phil.cpa.*