In our first post in this series, we explored how the One Big Beautiful Bill (OBBB) could impact your income tax bracket in retirement. Today, we’re turning our attention to a related—and potentially time-sensitive—topic: Roth conversions.
While Roth conversions are always worth evaluating, the tax reform proposals in the Big Beautiful Bill create a particularly compelling opportunity for retirees in the next few years.
Why Roth Conversions Matter in Retirement
Retirees often find themselves in a unique tax situation: they may have several years of relatively low income between retirement and the start of required minimum distributions (RMDs) at age 73. These years offer a chance to convert pre-tax retirement funds (like traditional IRAs or 401(k)s) into Roth accounts at potentially lower marginal tax rates.
The benefit? Qualified Roth withdrawals are tax-free—and Roth accounts aren’t subject to RMDs.
What the Big Beautiful Bill Changes
If passed in its current form, the Big Beautiful Bill could:
- Create a flatter middle-bracket structure, meaning that middle-income retirees could be pushed into higher effective rates sooner than before.
- Expand senior deductions temporarily, which could lower taxable income and make room for more Roth conversions before hitting the next bracket.
- Increase capital gains rates for some, making tax-free Roth withdrawals even more attractive for future income needs.
In other words, the tax math for Roth conversions could be more favorable now than it will be 5–10 years from now.
A Simple Example
Let’s say you’re 66, recently retired, and living off cash savings. Your taxable income is modest—around $40,000—and you have $1.2 million in a traditional IRA. Under the proposed tax brackets and senior deduction, you may be able to convert $60,000 to $80,000 of your IRA to Roth in 2025 and still stay in a relatively low bracket.
That $60K–$80K, if left in your traditional IRA, could eventually push you into a higher bracket when RMDs kick in. But converting now locks in today’s rate and sets up tax-free withdrawals later.
What You Can Do Now
If you live in Massachusetts, there’s another important angle to consider: the state exempts qualified Roth IRA distributions from income tax, just like the federal government—provided you meet federal criteria (account held at least five years and age 59½ or older). While this has been true for some time, it remains a significant benefit for retirees.
Traditional IRA distributions, by contrast, are fully taxable in Massachusetts. That means converting pre-tax dollars to Roth not only reduces your future federal tax burden—it may also help lower long-term state income tax exposure. But remember: the amount you convert is taxable in the year of conversion at both the federal and state levels. If done in large amounts, it could temporarily push your Massachusetts taxable income above $1 million, which may trigger the state’s surtax on high earners.
In short, Roth conversions can offer a two-fold benefit in Massachusetts—but should be planned carefully with both thresholds in mind. . But traditional IRA distributions are fully taxable at the state level. That means a Roth conversion not only reduces your future federal tax burden—it may also lower your long-term state tax exposure. Planning conversions now could be a double win if done carefully.
- Run a Roth conversion projection: Ask your advisor or CPA to help calculate how much you could convert without jumping tax brackets.
- Coordinate with your tax return: Use Holistiplan or similar tools to preview how a Roth conversion would affect your taxes for 2025.
- Think long-term: Focus on lifetime tax savings, not just this year’s refund.
Coming Up Next
In our next post, we’ll look at charitable giving and how the new senior deduction and potential itemization changes could alter the way retirees donate. Stay tuned!
Have questions about whether a Roth conversion makes sense for you this year? Let’s connect.
Evergreen Wealth Management provides flat-fee financial planning and investment management to individuals and families preparing for or living in retirement. Based in the Boston area, we specialize in helping clients create tax-efficient retirement income strategies that support the life they want to live.
The information contained herein is for educational purposes only and should not be construed as specific tax, legal, or investment advice. You should consult with a qualified tax professional or financial advisor before making decisions based on the content of this article. Evergreen Wealth Management is not a tax advisor or legal firm. All examples are hypothetical and intended for illustrative purposes only.