IRA Strategies That Keep More
of Your Money Out of the IRS
Roth Conversions · RMD Timing · IRMAA Avoidance
SECURE 2.0 · Inherited IRA · Federal Employee Planning
The IRS has a plan for your IRA. It involves Required Minimum Distributions that push you into higher brackets, Medicare surcharges on income you didn’t need, and a 10-year deadline that creates a tax bomb for your heirs. We help you build a competing strategy — before the RMDs start, while the conversion window is still open.
(SECURE 2.0)
(single, 2025 MAGI)
Withdrawal Window
(age 70½+, 2024)
During Your Lifetime
The Gap Years — When Your IRA Tax Bill
Is Entirely Negotiable
Between retirement (when your earned income drops) and age 73 (when RMDs begin), most retirees have a window of several years when their taxable income is unusually low. This is the optimal window for Roth conversions — and it closes permanently when RMDs begin.
The IRA Planning Timeline
Late Career
Max 401k/TSP contributions. Consider backdoor Roth. Plan for retirement income sources.
⭐ The Golden Window
Income drops. Roth conversions at lowest brackets. Fill standard deduction + 12% or 22% bracket annually. Before IRMAA lookback bites.
RMDs Begin — Window Closes
Mandatory withdrawals add to taxable income. Less room to convert. Social Security may be 85% taxable. IRMAA risk rises. QCDs become essential.
😰 The Cost of Waiting: Robert’s Story
Robert retired at 65 from the NIH with a $1.2M Traditional IRA. He didn’t convert anything during his 62–72 window because “taxes are taxes.” At 73, his RMD was $47,000. Combined with his pension, Social Security, and modest dividends, that RMD pushed him from the 22% bracket into the 24% bracket AND triggered a $2,600/year IRMAA surcharge.
Over 10 years of RMDs, Robert paid an estimated $68,000 in additional federal taxes he could have avoided with annual Roth conversions during the gap years — at rates as low as 12%.
$68,000 in avoidable taxes. Paid at 24–28%. Could have been paid at 12–22% during the window.
😌 The Alternative: Patricia’s Plan
Patricia retired at 63 from MCPS with a similar $1.1M IRA. During her 63–72 window, she converted $35,000–$50,000 per year — filling up the 22% bracket (just below the IRMAA trigger each year). By age 72, she had converted $420,000 to Roth. Her remaining Traditional IRA was $680,000 with a much lower RMD baseline.
Her RMDs stayed below the IRMAA threshold. Her heirs received $420,000 in Roth assets — tax-free, with no 10-year RMD clock on the Roth portion for her surviving spouse.
Taxes paid during conversions: ~$92,000 at 22%. Estimated tax savings vs. doing nothing: $4,800/year ongoing.
Roth Conversion Strategy — How It Actually Works
A Roth conversion moves money from a pre-tax account (Traditional IRA, 401k, TSP) to a Roth IRA. You pay income tax on the amount converted today — but that money then grows tax-free and is never subject to RMDs or income tax again.
How “Bracket Filling” Works (2024 Tax Brackets, Married Filing Jointly)
| Tax Bracket | Taxable Income Range (MFJ) | Rate on Conversions | Strategy |
|---|---|---|---|
| 10% | $0 – $23,200 | 10% — convert here first | Fill to top of 10% |
| 12% | $23,201 – $94,300 | 12% — sweet spot | Primary conversion zone — large headroom |
| 22% | $94,301 – $201,050 | 22% — often still worth it | Watch IRMAA — $212K MAGI triggers surcharge |
| 24% | $201,051 – $383,900 | 24% — case-by-case | Only if future RMDs will be in 32%+ bracket |
| 32%+ | $383,901+ | 32%+ — rarely worth it | Stop converting. Use QCDs instead. |
Note: Standard deduction ($29,200 MFJ in 2024) reduces taxable income before bracket calculation. Social Security benefits may be 0–85% taxable depending on combined income.
📅 Annual Bracket-Fill Strategy
Convert just enough each year to fill the 12% (or 22%) bracket without crossing into the next bracket or triggering an IRMAA tier. The most common and reliable approach — predictable tax cost, compounding benefit over 8–10 years.
⚡ Large Conversion in Low-Income Year
If you retire early (say at 60) and have a year with unusually low income before Social Security or pension begin, you may be able to do a very large conversion at low rates. Must be done carefully against IRMAA lookback (2-year lag in Medicare premium calculation).
🔄 Roth Conversion Ladder (FIRE Scenario)
For early retirees who need access to converted funds before 59½: convert each year and wait 5 years to access the principal tax-free. The “ladder” stages conversions so there’s always a 5-year-seasoned layer available. Requires careful sequencing and cash reserves.
⚠️ The IRMAA Trap — The Hidden Cost Most Planners Miss
Medicare IRMAA surcharges use a 2-year lookback — your 2025 Medicare premiums are based on your 2023 MAGI. A Roth conversion that crosses an IRMAA threshold doesn’t just cost you income tax on the conversion — it also triggers an extra $700–$6,000+ per year in Medicare Part B and D premiums, billed for the following year.
| MAGI (Single / MFJ, 2025) | Part B Monthly Premium | Annual Surcharge vs. Base |
|---|---|---|
| Under $106K / $212K | $185.00 | Base — no surcharge |
| $106K–$133K / $212K–$266K | $259.00 | +$888/yr per person |
| $133K–$167K / $266K–$334K | $370.00 | +$2,220/yr per person |
| $167K–$200K / $334K–$400K | $480.90 | +$3,551/yr per person |
| Over $500K / $750K | $628.90 | +$5,327/yr per person |
Approximate 2025 figures. IRMAA applies to both spouses separately — a couple crossing the first IRMAA tier each pays the surcharge.
RMDs: The Mandatory Withdrawal You Can’t Ignore —
But Can Plan Around
Starting at age 73 (75 if born in 1960 or later), the IRS requires annual withdrawals from your Traditional IRA, 401(k), and TSP. The amount rises as a percentage of your balance each year, compounding the tax impact.
RMD Factors by Age (IRS Uniform Lifetime Table)
| Age | IRS Distribution Factor | % of Balance Required | RMD on $500K IRA | RMD on $1M IRA |
|---|---|---|---|---|
| 73 | 26.5 | 3.77% | $18,868 | $37,736 |
| 75 | 24.6 | 4.07% | $20,325 | $40,650 |
| 78 | 22.0 | 4.55% | $22,727 | $45,455 |
| 80 | 20.2 | 4.95% | $24,752 | $49,505 |
| 85 | 16.0 | 6.25% | $31,250 | $62,500 |
| 90 | 12.2 | 8.20% | $40,984 | $81,967 |
✅ The QCD Strategy — Satisfy Your RMD Without Paying Tax on It
How It Works
If you’re age 70½ or older, you can donate up to $105,000/year directly from your IRA to a qualified public charity. The transfer counts toward your RMD but is NOT included in your taxable income — unlike a regular withdrawal followed by a separate donation.
Why It Beats a Deductible Donation
A regular IRA withdrawal + charitable deduction only helps if you itemize — and only reduces tax in your current bracket. A QCD reduces your MAGI directly, which: (1) reduces IRMAA Medicare surcharges, (2) reduces taxable Social Security benefits, and (3) benefits you even if you take the standard deduction.
The Math (Example)
Age 74. $850K IRA. RMD = $34,553. You donate $18,000/year to your church and a local food bank. QCD: $18,000 satisfies part of your RMD, not taxable, reduces MAGI. The remaining $16,553 is your taxable RMD — potentially keeping you below an IRMAA tier and saving $888–$2,220/year in Medicare surcharges.
Inherited IRA: What Your Heirs Face Without Planning
❌ Before SECURE Act (pre-2020): The Stretch IRA
Non-spouse beneficiaries could “stretch” withdrawals over their own life expectancy — potentially 40–50 years. This allowed the IRA to continue growing tax-deferred with small annual distributions, compounding the wealth across generations.
✅ Who Still Qualifies for Stretch IRA?
Surviving spouse · Minor children (until majority, then 10-year rule applies) · Beneficiaries less than 10 years younger than the decedent · Chronically ill or disabled beneficiaries. All others must use the 10-year rule.
⚠️ After SECURE Act (post-2020): The 10-Year Rule
Most non-spouse beneficiaries inheriting after January 1, 2020 must empty the entire IRA within 10 years of the original owner’s death. No minimum annual withdrawal required — but the full balance must be distributed by December 31 of the 10th year.
The Tax Problem This Creates
If your adult child inherits your $600,000 IRA while earning $120,000/year, they must add $60,000/year in withdrawals (spread evenly over 10 years) to their income. That pushes them into the 32% bracket on the IRA withdrawals — potentially owing $192,000 in total federal tax on the inherited amount.
Planning solution: Convert to Roth before death. Inherited Roth IRAs still require 10-year distribution, but distributions are income-tax-free to heirs.
Strategies to Reduce the Inherited IRA Tax Burden
Roth Conversion Before Death
The cleanest solution. Pay tax during the Roth conversion window at your (lower) rate. Heirs receive Roth IRA — 10-year distribution still applies, but distributions are tax-free.
IRA + Life Insurance Strategy
Leave the IRA to charity (avoids income tax entirely). Use life insurance proceeds (income-tax-free) to replace the wealth for heirs. Net benefit can exceed leaving the IRA directly due to tax savings.
Front-Load in Low-Income Years
If the heir anticipates lower income in certain years (career break, early retirement), concentrate withdrawals in those years to minimize the bracket impact. Cannot be done retroactively.
Spousal Rollover
A surviving spouse inheriting an IRA can roll it into their own IRA, restarting the RMD clock at their own age 73. Powerful — but requires correct beneficiary designation and avoidance of “estate” as beneficiary.
IRA Strategy for Federal & State Employees
Federal employees in the DC metro area have a unique tax planning situation: a FERS pension provides a stable base of taxable income in retirement, which often pushes TSP RMDs into higher brackets than anticipated.
📊 The FERS + TSP Income Stack Problem
A mid-career federal employee retiring at 60 with a $30,000 FERS annuity + $800,000 TSP faces this reality at age 73: the FERS pension alone occupies the bottom tax brackets. When TSP RMDs begin (~$30,000/year at 73), they’re almost entirely in the 22% or 24% bracket — with no lower-bracket room left. Social Security on top of that could push MAGI above IRMAA thresholds.
The planning response: use the 60–72 window to convert TSP-equivalent amounts (via IRA) to Roth before pension + RMDs arrive.
🔄 TSP vs. IRA Rollover Decision
The TSP’s advantages are real: the G Fund (government securities fund with short-term bond yields on long-term money — unavailable anywhere else), extremely low expense ratios (0.06%), and federal creditor protection. These are worth preserving.
However, the TSP cannot be directly converted to Roth. To do Roth conversions, TSP funds must first be rolled to a Traditional IRA, then converted. A partial rollover — keeping G Fund in TSP, rolling the rest to IRA for conversion flexibility — is often the optimal strategy.
TSP rollover strategies →🎯 Roth TSP Contributions — Worth It?
Federal employees have access to the Roth TSP — contributions are after-tax, but qualified distributions are tax-free. For mid-career federal employees who anticipate being in the same or higher bracket in retirement (due to pension stacking), Roth TSP contributions make strong sense.
SECURE 2.0 update: employer (agency) matching contributions to Roth TSP are now allowed to go into the Roth TSP directly — a significant change. Employees electing Roth TSP should review whether agency matches are designated correctly.
We’ve served the federal employee community in Montgomery County and the DC metro area since 2010. If you’re navigating TSP rollover decisions, FERS pension timing, or the interaction of your federal benefits with Roth conversion planning, we’ve worked through these scenarios many times.
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Serving the DC Metro Area Since 2010 · Free Initial Consultation
The IRS Has a Plan for Your IRA.
You Should Have a Better One.
Every year you wait to start Roth conversions is a year of paying taxes at a higher rate than you need to. We model your full retirement income picture — pension, Social Security, RMDs, IRMAA, and inheritance impact — and find the optimal conversion strategy for your situation.
Or call: 301-569-2224 · Mon–Fri 9AM–6PM ETMD Life Insurance · Brookeville, MD 20833 · 301-569-2224 · [email protected] · Licensed insurance producer. IRA and Roth conversion planning information is for educational purposes and does not constitute tax or investment advice — consult a qualified CPA or tax advisor regarding your specific situation. Tax figures reflect 2024–2025 law and are subject to change. IRMAA thresholds and Medicare premium amounts are approximate 2025 figures. RMD factors are from the IRS Uniform Lifetime Table and are updated periodically. SECURE 2.0 provisions are subject to regulatory guidance. TSP-specific information reflects current federal policy. Federal employees should consult their agency HR and TSP.gov for official benefits information. Legal · Privacy Policy ·