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There is a window in retirement that many people either don’t know exists or don’t know how to use. It opens the day you stop working and closes the day you start Social Security. For a lot of people, that span is somewhere between three and eight years.
During that window, your taxable income is often lower than it has been in decades. It may be lower than it will ever be again.
What you do with that window shapes a significant portion of your lifetime tax bill. Subscribe if you want more of this kind of content. The planning decisions that make the biggest difference in the ten years before and after retirement are what we focus on here.
What the Window Is Worth: The $1.6 Million Example
Here’s what this looks like in practice.
Take a 64-year-old who retires with $1.6 million in a traditional IRA and plans to delay Social Security until age 70. Between 64 and 70, that’s six years where taxable income might come from savings, maybe a small pension. If they’re drawing $60,000 from savings and receiving $15,000 from a pension, their taxable income before any IRA activity is $75,000.
As a married couple filing jointly, that puts them in the 22% federal bracket with meaningful room before the next threshold. That space is the opportunity. They can convert an additional $50,000 to $60,000 from the traditional IRA into a Roth each year, pay tax at 22%, and move that money permanently out of the tax-deferred bucket.
Run that for six years, and they’ve shifted $300,000 to $360,000 out of the IRA at known, moderate rates. By age 73, the balance subject to required minimum distributions is meaningfully smaller. The annual RMD is lower. Less of their Social Security becomes taxable because their combined income is lower. And IRMAA, which we’ll get to in a moment, is far less likely to trigger because income in prior years was managed deliberately.*
IRMAA: The Medicare Surcharge You May Not Have Heard Of
IRMAA stands for Income Related Monthly Adjustment Amount. It’s the surcharge on Medicare Part B and Part D premiums that kicks in when your income crosses certain thresholds, and it’s one of the least understood pieces of retirement planning.
Here’s what catches people: Your income from two years prior (not the current year) determines your IRMAA surcharge. Under current Medicare rules, if your modified adjusted gross income from two years ago exceeded the applicable threshold for your filing status, you pay a higher Medicare premium in the current year. That surcharge can range from a few hundred dollars per year to more than $5,000 per year per person at the highest income levels, and it applies to both spouses.
The practical consequence is that managing income in the gap years isn’t just about your federal income tax bracket. It’s also about managing future Medicare costs at the same time. A $60,000 Roth conversion that keeps you under the IRMAA threshold could save thousands in Medicare premiums two years later, on top of whatever it saves in retirement income taxes. These two things move together, and planning them separately misses the connection.*
Paying Now vs. Paying Later
Roth conversions aren’t free. You pay tax on the converted amount in the year of the conversion. The question is whether you pay at a lower rate now or at a higher rate later.
If your current rate is 22% and your expected rate at 73, once RMDs and Social Security are both stacking, is closer to 28% in this scenario, the math strongly favors converting now. Even if the rates turn out to be similar, there are structural benefits to a Roth that hold regardless. The money is never subject to RMDs during your lifetime. Withdrawals in retirement are tax-free, and when you pass assets to your heirs, the Roth is considerably more valuable.
Under the SECURE Act, non-spousal heirs, including your children, are generally required to empty an inherited traditional IRA within ten years. If your children inherit a large IRA during their own peak earning years, those forced withdrawals over ten years can push them into the 32% or 37% bracket. They’re giving up 32 or 37 cents on every dollar they inherit. If they inherit a Roth instead, withdrawals remain tax-free. The difference on a $500,000 inherited account is not a rounding error.*
The Widow’s Tax Penalty
There is one more scenario worth understanding because it catches people off guard, often at the worst possible time.
When one spouse passes away, the surviving spouse shifts from married filing jointly to single. Under current federal tax law, the income thresholds for single filers are narrower than those for joint filers. The same income that fit comfortably inside a joint bracket can land in a significantly higher bracket on a single return.
If that surviving spouse is drawing full RMDs from a large IRA and receiving a Social Security benefit that is now taxable at a higher rate, the effective tax rate can increase substantially, from an income stream that hasn’t changed at all.
Roth conversion work done during the gap years directly reduces this exposure. A smaller IRA means smaller RMDs. A larger Roth means more tax-free income available to the surviving spouse. Planning for this scenario while both spouses are alive and healthy is one of the highest-value conversations in retirement planning, and it’s also one that rarely happens unless someone raises it directly.
Social Security Timing and Funding the Gap
The decision about when to claim Social Security intersects directly with everything above.
Based on current Social Security Administration benefit calculations, someone who delays from age 62 to age 70 receives roughly 77% more per month than they would have collected at 62, plus cost-of-living adjustments on that higher base. If you’re married, your spouse receives the higher of the two benefits for the rest of their life as well. For people in good health, delaying at least to 67 and ideally to 70 produces substantially more lifetime income, particularly for those who live into their 80s or beyond.
But delaying Social Security also means funding those gap years from somewhere else, and this is exactly where the sequencing matters. Drawing from a taxable brokerage account means spending money that’s already been taxed, with relatively low additional tax cost. Doing moderate IRA conversions on top of that uses the low-income window to reduce the tax-deferred balance. When Social Security starts at 70, the result is a smaller IRA, a larger Roth, and a much cleaner tax picture for the rest of retirement.
The opposite path is one we see regularly. Retire, leave the IRA untouched because conventional advice says let it grow, start Social Security early for the income. Then arrive at 73 with a large tax-deferred balance, full Social Security already running, and an RMD that stacks everything together into a tax bracket no one expected. It’s nothing illegal or catastrophic; it’s just a window that closed and isn’t coming back.*
The Window Is Real, and It Closes
The gap years are the last stretch of the tax planning runway. Once RMDs begin and Social Security is running, the structure is largely set. What gets done in the window between retirement and those two income sources determines how much flexibility you carry into the rest of your retirement.
There’s a free download chapter from my book on tax-smart retirement that walks through the five specific tax traps in retirement in detail: RMDs, IRMAA, Social Security taxation, the widow’s tax penalty, and what happens to IRAs under the SECURE Act. If you’re within ten years of retirement, or already in the gap years right now, the time to look at this is before the window closes. Click here to schedule your Great Life Meeting
* The examples in this article are hypothetical and for illustrative purposes only. Actual results will vary based on individual circumstances, account balances, tax rates, investment returns, filing status, Social Security benefit amounts, and other factors specific to each household. IRMAA thresholds and Medicare premium amounts are subject to annual adjustment; confirm current thresholds with a qualified professional before making planning decisions. This content does not constitute financial, tax, or legal advice.