The year you sell, your tax bill is enormous. The years after can be strangely quiet. No salary. No distributions from the company. Social Security not started. Required withdrawals still years away. Most people enjoy the quiet. The smart ones use it.
The window
For many owners, the years between the sale and the start of Social Security and required minimum distributions are the lowest-income years they will have for the rest of their lives. Low income means low tax brackets. Low brackets are an opportunity that expires.
Most owners spent their working lives in the top bracket with no room to maneuver. For the first time, they can decide how much taxable income to have in a year. That control is the asset.
Why the window closes
Required withdrawals start. At 73, or 75 if you were born in 1960 or later, the IRS starts requiring withdrawals from traditional IRAs whether you need the money or not. Leave a fictional $2.5 million IRA alone, let it grow to $3.5 million by 75, and the first required withdrawal is about $142,000, rising most years after that. IRS required distribution FAQs
Social Security stacks on top. Benefits, investment income and required withdrawals together can push you back into high brackets for good. Up to 85% of Social Security benefits become taxable once other income passes thresholds that Congress set decades ago and never indexed for inflation.
Your kids inherit the problem. Most adult children who inherit an IRA must empty it within ten years. If you had already started your required withdrawals, they generally have to take some every year along the way too. That income lands in their peak earning years, at their tax rates. A large traditional IRA can be a large tax bill you’re leaving them. A Roth IRA still has to be emptied within ten years, but the withdrawals are generally tax-free.
Roth conversions, in plain English
A Roth conversion moves money from a traditional IRA to a Roth IRA. You pay income tax on the amount converted, in the year you convert. After that, the money can grow and come out tax-free under the Roth rules, there are no required withdrawals for you, and your heirs generally inherit it without income tax.
It’s a one-way door. Since 2018, a conversion can’t be undone. Convert in January, watch the market fall in March, and you still owe tax on January’s value. That is why many conversions happen later in the year, once income for the year is clearer, or in pieces.
The real power is paying the tax from outside the IRA. When the tax comes from sale proceeds sitting in a taxable account, the full converted amount lands in the Roth. In effect you’re moving more money into the tax-free bucket, and the taxable account that pays the bill was going to throw off taxable income anyway. For an owner who just sold, that cash usually exists.
How it’s usually done: conversions sized each year to fill the lower brackets, with the tax paid from cash rather than from the IRA, stopping short of the thresholds that raise costs elsewhere. Simple to say, hard to execute. Which brings us to the math.
What a year of conversions actually costs
A fictional married couple, both 63, sold their company last year and live on the proceeds. They have $60,000 of interest income, take the standard deduction, and have $2.5 million in a traditional IRA. Here are three ways to size this year’s conversion, using 2026 federal brackets and Medicare tiers for illustration. Their real years would use that year’s numbers, and their CPA’s.
| Stay under Medicare’s first tier | Fill the 22% bracket | Fill the 24% bracket | |
|---|---|---|---|
| Amount converted | $158,000 | $183,600 | $375,750 |
| Federal tax on the conversion | About $27,500 | About $33,100 | About $79,200 |
| Average federal rate on the conversion | About 17% | About 18% | About 21% |
| Extra Medicare Part B and D premiums two years later, for the couple | $0 | About $2,300 | About $12,700 |
Read across the last row. The aggressive option converts more than twice as much, at a higher average rate, and also buys a five-figure Medicare surcharge two years later. It can still be the right answer if the alternative is required withdrawals taxed at 32% or more for decades. The point is that it’s a trade, it has a price, and the price is knowable in advance.
The Medicare trap nobody mentions at closing
Medicare charges higher premiums to people with higher income, and it looks back two years to decide. Your 2026 premiums are based on your 2024 tax return. The year you sell can raise your Medicare costs two years later, and so can every conversion.
| 2024 income, married filing jointly | Monthly Part B premium, per person |
|---|---|
| $218,000 or less | $202.90 |
| $218,001 to $274,000 | $284.10 |
| $274,001 to $342,000 | $405.80 |
| $342,001 to $410,000 | $527.50 |
| $410,001 to under $750,000 | $649.20 |
| $750,000 and above | $689.90 |
Part D adds its own surcharge on top of the plan premium, from $14.50 to $91.00 a month per person in 2026. And the tiers are cliffs: one dollar over a line costs you the whole next tier, for both spouses. Medicare costs
A one-time gain on its own isn’t grounds for an appeal. Stopping work is, and Social Security’s own guidance lists the sale of a business as an example of a work stoppage. If the sale ended your work, Form SSA-44 asks Social Security to use a more recent, lower year’s income instead. Whether it helps depends on the numbers, so the premium is usually planned around rather than counted on.
The other lines conversions can cross
Medicare gets the headlines, but a conversion raises your income everywhere income is measured. A few of the lines that matter:
- Health insurance before 65. Buy coverage on the exchange and conversion income can shrink or erase premium subsidies.
- The net investment income tax. Conversions aren’t investment income, but they raise the income that decides whether your dividends and interest pick up the extra 3.8%.
- The 2025 tax law’s new deductions, including the extra deduction for people 65 and older and the higher state and local tax cap, which both shrink as income rises.
- Social Security taxation, once benefits start.
Each line is a reason conversions get sized with a spreadsheet, not a rule of thumb.
Where a Florida move fits
Federal law bars states from taxing nonresidents on retirement income. If you genuinely become a Florida resident, conversions done after the move generally aren’t taxed by New York at all. Done before the move, New York taxes them as ordinary income. For a large IRA, the order of those two decisions can be worth a lot. The move has to be real, and documented. What making Florida your home involves
New York softens the blow a little. Each New Yorker 59½ or older can exclude up to $20,000 a year of pension and IRA income from state tax, and the state has said Roth conversion income counts toward it. For a married couple who both qualify, the first $40,000 of each year’s conversions can escape New York tax entirely. Before 59½, there’s no exclusion. New York information for seniors
A fictional timeline
A couple sells at 62. Illustrative only; your years will differ.
| Years | What’s happening | What often gets weighed |
|---|---|---|
| Sale year | Very high income | Conversions usually wait. It’s often the year for charitable giving instead. |
| Ages 63 and 64 | Low income, before Medicare | Room to convert in lower brackets. These conversions count toward Medicare premiums two years later. |
| Ages 65 to 69 | On Medicare, Social Security delayed | Conversions sized around a chosen Medicare tier. |
| Age 70 | Social Security starts | Less room; conversions shrink or stop. |
| Age 73 or 75 | Required withdrawals begin | The window is mostly closed. |
The right amount each year depends on your brackets, your state, your Medicare tier, your heirs’ brackets and what you need to live on. It’s a multi-year projection, done with your CPA, revisited every year. Owners who treat it as a one-time decision usually convert too little in the cheap years and too much in the expensive ones.
How Morrowgate handles this. At Morrowgate, the conversion plan is a multi-year projection built with your CPA and revisited every year: how much to convert, which Medicare tier to stay under, where the tax money comes from, and how a move to Florida changes the order. You choose the trade-offs with the numbers in front of you, instead of finding them on a premium notice two years later.
Questions owners ask
Is there an income limit on Roth conversions?
No. Anyone can convert, at any income. The limits that matter are the tax brackets and thresholds the conversion pushes you across.
Can a conversion be undone?
No. Since 2018, conversions can’t be recharacterized. Once it’s done, the tax is owed on the amount converted.
Can a required minimum distribution be converted?
No. Once required withdrawals start, each year’s required amount has to come out first and can’t be rolled into a Roth. That is one more reason the conversion window sits before they begin.
Does a conversion make sense in the sale year itself?
Usually not, because the sale already puts income in the top brackets. The sale year tends to be the year for charitable gifts, and the quieter years after it the years for conversions.
Where this guidance stops
This article is general education on Roth conversions and post-sale tax planning: how the rules and the options generally work. It is not tax, legal or investment advice, and nothing here is a recommendation for your situation. Rules change and outcomes turn on the facts, which is why a CPA and an attorney look at a family’s own numbers before anything is done.
Sources
- IRS: 2026 inflation adjustments, including the One, Big, Beautiful Bill amendments
- IRS: Required minimum distribution FAQs
- IRS: Retirement topics, beneficiary
- IRS Publication 590-B: Distributions from IRAs (Uniform Lifetime Table)
- CMS: 2026 Medicare Parts A and B premiums and deductibles
- Social Security: Request to lower an income-related monthly adjustment amount
- New York State: Pension and annuity income exclusion and Roth conversions (TSB-M-98(7)I)
- 4 U.S.C. § 114: State taxation of nonresidents’ retirement income