The SECURE 2.0 Act Window: A Roth Conversion Strategy to Cut RMDs and Taxes in Your 50s, 60s, and 70s
For most, Required Minimum Distributions are a December problem squeezed between Thanksgiving and New Year's Eve.
I see it differently.
The way you handle RMDs affects far more than just this year’s tax bill.
It shapes the tax burden on your IRA for the next two decades.
That’s why I want to talk about this today.
If you’re in your 50s or 60s, this matters even more – because the window to shrink your future RMDs is wide open right now, but it won’t stay that way.
Two things matter right now:
Timing → September gives you room to adjust withdrawals, conversions, and charitable giving while you still have options. Wait until December, and you’re just reacting.
Opportunity → The SECURE Act 2.0 has opened the widest planning window we’ve seen in a generation. You can actively shrink the size of your future RMDs before they ever show up.
I want to give you a clear plan you can use today, so that RMDs become a predictable part of your income system, rather than a tax problem waiting to happen.
But first, let's establish the new rules of the game
These are the strategic assets you now have at your disposal.
1. The RMD Age Is Now 73, Going to 75
If you turned 72 in 2023 or later, your first forced withdrawal is delayed until the year you turn 73. Starting in 2033, it gets pushed back again to 75.
This delay is the foundation of our new strategic window.
2. The Penalty for Forgetting Is Slashed
The old 50% penalty for a missed RMD was absurdly punitive. That's now cut to 25%, and if you correct the mistake promptly, it drops to just 10%.
The threat level has been downgraded, but discipline is still paramount.
3. Roth 401(k)s Are Finally Exempt
Starting in 2024, Roth 401(k) and 403(b) accounts are no longer subject to RMDs for the original owner. This aligns them with Roth IRAs and removes a major, illogical flaw in the system.
4. Charitable Distributions Got an Upgrade
For the charitably inclined, Qualified Charitable Distributions (QCDs) are now more powerful. The annual $100,000 limit is now indexed to inflation ($105,000 for 2024, rising to $108,000 in 2025).
These are our new tools.
But a critical question immediately surfaces when discussing proactive tax strategy:
"This sounds great, but where does the money to pay the taxes on a Roth conversion come from? Do I have to sell my best assets to pay the IRS?"
That’s the right question to be asking, because it gets to the heart of a major flaw in most financial advice.
And for most people, the answer is a terrible one: yes, you sell your assets.
Most advice implicitly assumes you’ll have to sell off some of your stocks to pay the tax bill.
To me, that's just a terrible trade. You're being forced to sell the very assets that are supposed to generate your income for the long haul. It doesn't solve a problem; it just creates a new one.
And to make things worse, if the stock you sell has gone up in value, you could get hit with a second tax bill on the profit from that sale.
For those of you who are new here, my entire approach is built to avoid this exact problem.
My core principle is that you should fund your life and your financial strategies with new income generated by your portfolio - not by cannibalizing the portfolio itself.
We do this with a straightforward system using simple, conservative options contracts.
You can think of it in two ways:
We "rent out" the stocks we already own to other investors for a monthly fee (covered calls).
We get paid cash today for simply agreeing to buy a quality stock we wanted anyway, but at a lower price in the future (cash-secured puts).
“But I’ve been told all my life that options are risky.”
That’s the most common pushback I hear when I bring up options. And here’s the distinction:
BUYING options is gambling. You’re paying a premium for a lottery ticket. You need to predict the exact direction and timing of a move. Most of those bets expire worthless.
SELLING options under a disciplined system is the opposite – this is what we do. You’re the one collecting the premium. You’re not guessing. You’re setting rules so that the “worst case” leaves you with an outcome you already wanted.
If you sell a covered call, the worst case is you sell a stock you already own at a price you were happy to take.
If you sell a cash-secured put, the worst case is you buy a stock you wanted anyway, but at a discount.
The difference is simple: buyers are gambling on hope, sellers are running the casino. We’re in the business of collecting rent, not buying lottery tickets.
The cash this system produces is the ideal funding source for the tax bill.
It’s a separate stream of income, generated on top of your dividends, that can be used for these kinds of strategic expenses.
So, the answer to the question “Do I have to sell my best assets to pay the IRS?“ is a clear no.
You are not selling your best assets.
You are using the cash the portfolio earned this month to solve a long-term tax problem.
Now that we have our funding source, let's run the numbers and see what this looks like under real-world conditions.
The Case Study: Napkin Maths
Let's invent a typical member of our cohort. We'll call him John.
→ Who: John is a 64-year-old retired systems analyst. His wife is the same age.
→ Assets: He has a traditional IRA worth $1.2 million. He also has a taxable brokerage account and some cash reserves.
→ Future Income: He and his wife expect a combined Social Security benefit of $60,000 per year, starting at age 70.
John won the accumulation game.
Now he's facing the decumulation problem and knows his $1.2M IRA is a tax time bomb.
Let's model two futures for him: the passive, compliance-focused approach and the active, strategic approach.
[For our math, we'll assume a 5% annual growth on his IRA and use 2024 federal tax brackets for a couple filing jointly. We'll deliberately ignore state taxes and Medicare premiums for this initial calculation to establish a clean baseline.]
Scenario A: The Passive Approach
John decides to let his IRA grow untouched until the IRS forces his hand.
This is the December mindset.
The Tax Bill → After an estimated standard deduction, this places him squarely in the 22% marginal tax bracket, with a federal tax bill of around $13,500. Every he will be reacting to compliance demands as the IRS flies him into higher tax jurisdictions.
Scenario B: The Engineer's Approach
It's September. John is 64.
He decides to use the "golden window" from age 65 to 69 to execute his strategy. His goal — perform Roth conversions while staying within the 12% federal tax bracket.
The Strategy: He decides to convert $80,000 of his IRA to a Roth IRA each year for five years.
Annual Tax Bill: The federal tax on an $80,000 conversion is roughly $9,300.
Total Tax Paid over 5 years: 5 x $9,300 = $46,500.
Funding Source: John uses the cash flow from his covered calls and puts to pay this tax bill.
At the age of 69, he has transferred $400,000 to a Roth IRA. His traditional IRA is now smaller, at approximately $1.1 million.
The Payoff at Age 75: His smaller traditional IRA grows to $1.47 million.
The New RMD: $1,470,000 / 24.6 = $59,756
The New Tax Reality: His total taxable income is now RMD ($59,756) + Social Security ($51,000) = $110,756.
This keeps him safely in the 12% marginal tax bracket, with a new federal tax bill of around $8,900.
By executing this strategy, John has permanently reduced his annual federal tax bill by $4,600. Over a 20-year retirement, that adds up to more than $92,000 in cumulative tax savings – easily justifying the upfront cost he paid on his own terms.
The Pre-Flight Checklist: Mitigating Risk & Second-Order Effects
The plan we laid out is a powerful baseline, but the real world is messy.
Before you move a single dollar, you need to account for these three variables. Ignoring them can turn a smart strategy into a really costly mistake.
1. The Medicare Premium Trap (IRMAA)
This is the single most dangerous hidden variable for this demographic.
If you're on Medicare, the government uses your income to decide your monthly premium. They have a chart with specific income levels, and if you go over one—even by a single dollar—your premiums for the entire next year can jump by hundreds or even thousands of dollars.
It’s like a baggage fee at the airport: it doesn't matter if you're one ounce over or twenty pounds over, you're paying the full penalty.
A Roth conversion adds to your official income, so it's very easy to accidentally step over one of these lines and get hit with a massive, avoidable bill.
What you need to do:
Before you do anything, you must look up this year’s Medicare income levels. Your real limit for a conversion isn't the top of your tax bracket; it's the income number just below that next price hike. Plan to stay under it.
2. The Second Tax Bill: Your State
The numbers we ran earlier were for federal taxes only, to keep the example simple. But for most of us, there's a second bill: state income tax.
If you live in a high-tax state like California, New York, or Illinois, this is a big deal. The total tax you pay on a conversion could be 30-50% higher than the federal-only number.
What you need to do:
You have to factor this in. The higher total tax doesn't mean the strategy is wrong, but it does mean it will take longer for the future savings to pay back your upfront cost. You need to run the numbers with your real, all-in tax rate.
3. Your "Plan B": What If the Market Goes Quiet?
Our plan uses the cash from our options strategy to pay the tax. But that income isn't a fixed salary; some years it will be higher than others.
If the market is unusually calm, the premiums we collect can be lower. You can't count on a specific dollar amount every single year to be there like clockwork.
What you need to do:
You need a backup plan. Have enough cash set aside in a savings account to cover at least one year’s estimated tax bill, just in case you have a slow year with your options income. It's your emergency fund for this specific strategy.
The Actionable Age-Based Schematic
Think of this as a multi-decade engineering project.
The work done in your 50s lays a stronger foundation, making the mission in your 60s more effective. The work done in your 60s transforms the reality of your 70s.
But if you are arriving at this project today, you don't start from the beginning. You start from where you are.
Find your current age bracket below.
The objective is to optimize your position from where you stand right now.
Phase 1: Mission for Your 50s
Objective → Halt the growth of your future tax liability and begin building a tax-free "off-grid" power source.
Step 1. Add it up.
Make a simple list of every account you have. Put them in three columns:
Traditional (tax-deferred: 401(k), IRA)
Roth (tax-free)
Taxable (regular brokerage)
Step 2. Check your mix. Add up the totals. What percent of your money is in tax-deferred accounts? 60%? 80%?
The higher that number, the bigger your future RMD problem.
Step 3. Change new contributions. Log in to your 401(k). If you can, switch new contributions from Traditional to Roth. That way, you pay the tax now (at today’s rate) and avoid a forced withdrawal later. Note: a new SECURE Act rule will require high earners to put catch-up contributions into Roth starting in 2026 — so get used to this shift now.
Step 4. Run a “10-year what-if.” Project what your accounts will look like in 10 years under the old setup versus with more Roth.
The difference is how much of a future tax problem you just prevented.
Phase 2: The 60s
Objective → If you are in your 60s, this is your primary battlefield. The "golden window" before RMDs begin is open now. Your mission is to systematically and strategically reduce the size of your tax-deferred accounts.
Step 1. Know where you stand.
Do the same account list from Phase 1.
You need a clear picture of Traditional vs. Roth vs. Taxable.
Step 2. Gather the numbers.
Pull your 2024 tax return (for reference), look up the official 2025 Medicare IRMAA tables, and check your 2025 tax brackets.
These tell you where the cliffs are.
Step 3. Set your safe limit.
Figure out how much IRA money you can convert this year without jumping into a higher Medicare premium tier. This is your ceiling.
Step 4. Do the conversion.
Between November and December, call your brokerage and tell them to move that amount from your Traditional IRA into your Roth IRA. Do it “in-kind” (moving the investments themselves, not selling to cash).
Important: it must be done before December 31, 2025.
Step 5. Set aside the tax.
Calculate what the conversion will cost you in federal and state taxes. Move that exact amount into a separate savings account labeled “2025 Tax Payment.”
Don’t touch it. That’s how you keep control of the bill.
Phase 3: The 70s (Managing the Engineered Output)
Objective → If you are already in your 70s, the window for large-scale conversions may have closed, but the mission shifts from pre-emptive action to highly efficient management. Your goal is to handle your RMDs with maximum precision, treating them as a component of your income engine, not a tax crisis.
Step 1. Verify your number.
In January, your brokerage will send you the RMD amount. Double-check it.
If you have multiple IRAs, you can take the total from any one of them.
But if you have a 401(k) or 403(b), you must take each RMD separately.
Step 2. Turn it into a paycheck.
Divide your annual RMD by 12. Set up an automatic monthly transfer from your IRA into checking. Example: if your RMD is $36,000, move $3,000/month.
That way, it feels like a steady paycheck instead of one big tax hit.
Step 3. Do your giving first.
If you give to charity, send the money directly from your IRA (this is called a QCD). It counts toward your RMD but doesn’t raise your taxable income.
Step 4. Re-invest the leftovers. If you don’t spend all of your RMD, set up an automatic transfer every quarter into your taxable brokerage account.
That keeps the money working instead of sitting idle in a checking account.
This is the framework. Simple, systematic, and designed to put you in control.
Don’t wait for December. By then, it’s just about checking the IRS’s box. The win comes from starting now, running the numbers, and executing your plan before the year closes.
That’s how you trade compliance for strategy - and how you win the retirement income game.
Thank you for tuning in today and for your support of this project!
Mike Thornton, Ph.D.