Most physicians spend their peak earning years maxing out pre-tax retirement accounts, reducing taxable income, and deferring the tax bill to a future version of themselves. And that's generally the right thing to do, a reasonable strategy in an era where tax brackets are here to stay.
The only problem is that the future…eventually arrives, and you're left staring at a $2 million traditional IRA with a mandatory withdrawal clock ticking toward 73.
Low-income years are when you can negotiate with that future tax bill. And if you're on the FIRE path, going part-time, taking a sabbatical, or your household just dropped to one income? You may have more of a fighting chance right now than you think.
Learn more: How to Avoid These 6 Costly Roth Conversion Mistakes
The Opportunity
A Roth conversion moves money from a pre-tax retirement account like your traditional IRA, 401(k), rollover account, or SEP-IRA into a Roth IRA. You pay ordinary income tax on the converted amount in the year of conversion. After that, the money grows tax-free, and qualified withdrawals are also tax-free.
There's no annual dollar cap on how much you can convert, and no income limit. Unlike direct Roth IRA contributions, which phase out above certain income thresholds, conversions are open to everyone regardless of what they earn.
This works because you can pay taxes now at a known, lower rate to avoid paying taxes later at a higher one. Converting some pre-tax money into Roth today means smaller pre-tax balances later, which reduces your future required minimum distributions and your future taxable income.
To be clear, “lower” is key. A low-income year is only valuable for conversions if your marginal rate is actually lower than what you'd otherwise pay on that money down the road.
For most physicians, that's true because the alternative is large RMDs landing on top of Social Security, investment income, and possibly a pension, all arriving simultaneously in your 70s.
Start by identifying the bracket you're in this year, then project what your taxable income looks like at 73 when RMDs start. If the retirement-year rate is likely higher than today's, you need to actively think about Roth conversions.
The Three Low-Income Windows Physicians Get
Most personal finance coverage treats Roth conversions as a retirement-only move, as something you do in the gap between your last paycheck and your first RMD. That is perfectly valid. But physicians often get earlier windows that go unused.
FIRE
This is the big one. If you retire in your mid-to-late 50s and delay Social Security, you may have a decade-plus of genuinely low taxable income before RMDs force distributions. Retirement tax projections tend to look like a U.
Taxes drop in early retirement before RMDs push them back up later. The bottom of that U is your conversion window. A physician who retires at 62 and doesn't start converting until 68 has lost six years of 10% and 12% bracket space, roughly $798,000 of conversion capacity at current rates (at $133,000/year in the 12% bracket).
A sabbatical or locums transition
Some physicians don't fully retire, they just take a step back. That could mean cutting to part-time, taking a gap year or shifting to locums at a lower volume.
If your W-2 income drops from $400,000 to $80,000, your taxable income may fall in territory you haven't seen since residency. That's a conversion year you can count on.
Single-income household
Maybe your spouse goes back to school, takes a career break, or leaves a high-earning job to raise kids or care for a parent. Your household income will drop for two or three years.
The top tax bracket won't change, but the amount of taxable income will and the difference between what you're earning and the next bracket ceiling can translate into a good opportunity for conversion.
When one of these windows opens, treat it as a conversion year by default unless there's a specific reason not to. Don't wait for the perfect year.
In case you missed it: How Do You Retire at 55?
Fill the Bracket, Not the Account
The standard execution approach is called bracket-filling. You calculate your taxable income before any conversion, then figure out how much room remains before you hit the ceiling of your current bracket. Convert up to that ceiling and stop there.
For married filers in 2026, the 12% bracket tops out at $100,800, and the 24% bracket at $403,550. The standard deduction for married filing jointly is $32,200.
Let's run it with an example. Take for instance, a physician couple, with one spouse working part-time bringing in $85,000. After the standard deduction, taxable income before any conversion is around $52,800.
For a married couple in the 12% bracket in 2026, the conversion capacity runs to approximately $133,000. In this scenario, they can convert roughly $48,000 and stay entirely within the 12% bracket. Next year, they do it again.
This strategy relies on repeated conversions. Not a single dramatic one, but consistent, methodical bracket-filling across every low-income year you get. Calculate your taxable income for the year, subtract it from the top of your current bracket ceiling, and convert that difference. Every year between retirement and RMDs that passes without a conversion is a permanently lost opportunity.
This is a use-it-or-lose-it situation.
What You're Actually Hedging Against
Let's talk about the RMD problem, because this is the real reason to even bother with this conversion business.
Physicians who max out pre-tax accounts across a full career can retire with $2 to $4 million sitting in traditional accounts. That money has never been taxed. The IRS is patient but not forgetful.
Under current law, required minimum distributions start at age 73 — and for those born after 1959, that age moves to 75 in 2033.
By 73, a portfolio that's been growing through early retirement can force out distributions well above what you actually need to spend. Those distributions land on top of Social Security (85% of which is taxable for most physicians), plus investment income from a taxable brokerage, plus whatever else you've got going.
This inadvertently pushes retirees back into high brackets at a time when they thought they were done with high income.
Roth conversions done in low-income years reduce that pile. Every dollar converted now is a dollar that won't show up as a mandatory distribution in your 70s.
Money inside a Roth has no RMD requirement during the owner's lifetime. It sits there and compounds until you decide to pull it out. Running an RMD projection using your current traditional account balance and an assumed growth rate through age 73 can be useful. If the forced income exceeds what you'd actually spend, that's your sign to start converting.
Also read: Does Inflation Hit Retirees Differently? What Physicians Need to Know
The IRMAA Problem
Roth conversions may feel like they're free in retirement but they aren't. The main cost outside of the tax bill itself is what an oversized conversion can do to your Medicare premiums two years later.
IRMAA surcharges are based on your MAGI from two years prior. A Roth conversion executed in 2026 affects IRMAA premiums in 2028. Most people don't realize this until they get a letter from the Social Security Administration.
For 2026, the first IRMAA surcharge kicks in at $109,000 MAGI for single filers and $218,000 for married filing jointly. IRMAA is more like a cliff than a ramp. One dollar over the threshold triggers the full surcharge for that tier. The jump from no IRMAA to Tier 1 costs a couple $2,297 per year. From Tier 1 to Tier 2, that's an additional $3,475.
This is where early retirement pays off in ways that later retirees don't get. If you're doing conversions in your mid-50s, the two-year IRMAA lookback doesn't reach Medicare age yet.
The two to three years before Medicare enrollment at 65 are some of the most valuable conversion years as conversions in that window can be sized more aggressively without triggering IRMAA, because you're not yet on Medicare.
Once you're 63 or 64, model the lookback before you convert. Keep MAGI below the threshold for your filing status in those years, even if it means converting less. The heavier lifting belongs in your 50s.
Also read: Why Most Doctors Retire With Too Much Money (And What to Do About It)
Pay the Tax From Outside the Account
Did you know that the tax on a Roth conversion should come from cash or a taxable account, not from the converted amount itself?
If you convert $100,000 and withhold $22,000 for taxes from the converted funds, only $78,000 grows tax-free. That $22,000, invested at 7% for 25 years, would have been worth roughly $119,000 tax-free. You're shrinking what goes into the Roth and compounding the damage over decades.
If you don't have enough in a taxable account to cover the tax bill, convert a smaller amount. The whole point is getting the maximum pre-tax dollars into tax-free growth. Withholding from the converted amount works against that from day one. Treat outside cash as a structural requirement of the strategy, not optional. If the cash isn't there, scale back the conversion until it is.
Learn more: New Tax Laws and Their Impact on Older Americans
The 5-Year Clock for Early Retirees
If you're under 59½ and converting, the five-year rule matters for how you access converted funds.
There's no 10% early withdrawal penalty on the conversion itself. But converted funds withdrawn before five years from the date of conversion are treated as taxable income. Each Roth conversion starts its own five-year clock.
This is the mechanics behind the Roth conversion ladder: converting each year, waiting five years, then pulling from conversions in order. It works, but it requires bridge income for that first five-year stretch. Taxable accounts, HSA funds, or cash savings have to carry you while the ladder builds. Track each conversion with its date and dollar amount, and don't plan to access converted principal inside the five-year window.
Also read: 8 Healthcare Options For Early Retirees
Are Conversions Still Worth It With Permanent Tax Rates?
This comes up more often than you'd think. For years, the urgency around Roth conversions was partly because of the looming TCJA sunset. That argument is gone. The One Big Beautiful Bill Act, signed on July 2025, permanently extended the TCJA rate structure. The 10/12/22/24/32/35/37% brackets are here to stay.
The case for converting in low-income years doesn't depend on rates going up, though. It depends on whether your rate today is lower than your effective rate on those same dollars distributed as RMDs later.
For most physicians with large traditional balances, that may very well be the case. Locking in tax-free Roth balances today is a hedge against future legislation that may not be as predictable. The rates are known now. What they look like in 2040 is anyone's guess.
Every year you don't convert in a low-income year is bracket space you can't get back. The window isn't permanent, eventually Social Security will start, RMDs will kick in, income may rise, and all your leverage will disappear. Use the quiet years to your advantage.
This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified tax professional before executing a Roth conversion strategy.
Learn more: The Physician's Guide to a Regret-Free Retirement: Three Steps to Financial Freedom
Frequently Asked Questions
What is a Roth conversion and how does it work?
A Roth conversion moves money from a pre-tax retirement account like a traditional IRA, 401(k), 403(b), or SEP-IRA into a Roth IRA. You pay ordinary income tax on the converted amount in the year it happens. After that, the money grows tax-free and qualified withdrawals are never taxed again. There is no annual limit on how much you can convert, and no income restriction.
When is the best time to do a Roth conversion?
A conversion tends to make the most sense when your current marginal tax rate is lower than what you'd reasonably expect in retirement, when you're in a gap period such as early retirement, a sabbatical, or between jobs, or when your taxable income is expected to rise once Social Security and RMDs are both in play. For physicians, that gap between the last paycheck and the first required minimum distribution is typically the prime window.
Do Roth conversions make sense if tax rates are staying the same?
Yes. The One Big Beautiful Bill Act, signed July 2025, permanently extended the TCJA rate structure. The 10/12/22/24/32/35/37% brackets are no longer scheduled to sunset. But the case for converting in low-income years doesn't hinge on rates going up. It hinges on whether your rate today is lower than your effective rate on those same dollars distributed as RMDs later, and for most physicians with large traditional balances, it is.
What does “filling the bracket” mean in Roth conversion planning?
Bracket-filling means converting just enough each year to bring your taxable income up to the ceiling of your current tax bracket without crossing into the next one. For a married couple with no other income in 2026, the conversion capacity in the 12% bracket alone runs to approximately $133,000. The goal is to repeat this every low-income year rather than doing one large conversion that spikes your tax bill.
How do Roth conversions affect Medicare premiums?
IRMAA surcharges are based on your MAGI from two years prior. Your 2026 MAGI determines your IRMAA in 2028. IRMAA operates on a cliff structure, exceeding a threshold by even one dollar triggers the full surcharge for that tier. A large conversion in the wrong year can raise Medicare Part B and D premiums significantly, which is why timing matters as much as amount.
What are the IRMAA thresholds for 2026?
For 2026, the first IRMAA surcharge kicks in at $109,000 MAGI for single filers and $218,000 for married filing jointly. At the highest income tier, a couple on Medicare could pay over $13,800 per year in IRMAA surcharges alone, on top of their plan premiums. Physicians doing Roth conversions near or after age 63 should model their MAGI carefully before executing.
Can I do a Roth conversion if I retire early and am under 59½?
Yes, but the five-year rule applies. There is no 10% early withdrawal penalty on the conversion itself. However, converted funds withdrawn before five years from the date of conversion are treated as taxable income. Each Roth conversion starts its own five-year clock. Early retirees using a Roth conversion ladder need bridge income like taxable accounts, HSA funds, or cash savings to cover that first five-year gap before the converted principal is accessible.
Should I pay Roth conversion taxes from the IRA or from outside funds?
Always from outside the IRA. If you convert $100,000 and withhold $22,000 for taxes from the converted funds, only $78,000 grows tax-free. That $22,000, at 7% over 25 years, would have been worth roughly $119,000 tax-free. If you don't have enough in a taxable account to cover the bill, the right move is to convert a smaller amount, not to withhold from the converted funds.
At what age do required minimum distributions start?
Under current law, required minimum distributions start at age 73. SECURE 2.0 introduced staged increases in the RMD starting age, giving many retirees extra flexibility but also creating complexity around planning. For those born after 1959, that age moves to 75. Roth IRAs have no RMD requirement during the original owner's lifetime, which is a core reason to convert while income is low.
Is a Roth conversion permanent?
A Roth conversion is permanent. Once you do it, there is no do-over. Prior to 2018, it was possible to reverse a conversion through a process called recharacterization. That option no longer exists. This makes it especially important to size conversions carefully and model the tax impact before executing, not after.
Upcoming Event
Cheap Doors in a Loud Market
The chorus of “real estate is dead” has gotten loud again. Elevated rates, regional bank wobbles, vacancy fears bleeding over from office into every other asset class. I get it.
The headlines write themselves. The cycle truth gets lost in the noise: the best multifamily entries happen when capital is nervous, not when it's exuberant.
Lightstone DIRECT just acquired Hidden Lakes Apartments, a 384-unit garden-style community in Grand Rapids, Michigan. They picked it up from the original developers at roughly a 12% discount to comparable sales and a 40% discount to replacement cost. Translation: nobody is building this asset class right now at these prices, which puts a structural floor under what existing inventory is worth.
Grand Rapids itself is the kind of market that quietly grinds higher while the coastal cities hog the headlines. It has diversified employment and steady in-migration, with rents currently more than $100/month below comparable properties. That last gap is the easy money. Bring rents to market and tighten operations. No heroic capex story required.
For a physician investing after-tax dollars, the appeal here is the absence of magic. The deal pencils on operational basics, not on hoping rates fall or cap rates compress.
Lightstone is also writing 20% of the equity themselves, which means we eat the same meal they do.
On May 19th at noon Eastern, Annina Vaisanen will walk through the full underwriting and the projected 12.3% Net IRR over a four-year hold.
