Five Reasons Roth Conversions and Pensions Work Well Together
This financial planner unpacks why Roth conversions can save you big-time on taxes if you're a retiree with a pension.


For many retirees, navigating income planning and tax strategies can be complex, especially when considering Roth conversions alongside pension income.
Roth conversions may not be the right strategy for everyone, but for those retiring with a pension, it can start to make more sense for the reasons mentioned here. In this article, I unpack why Roth conversions might be a good fit if you're a retiree with a pension.
What is a Roth conversion?
Before diving into the reasons for implementing a Roth conversion, it is essential to understand the fundamental concept behind it. A Roth conversion involves transferring money from a tax-deferred account, such as a traditional IRA, 403(b), or 401(k), to a Roth IRA.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
This involves paying taxes on the converted amount in the tax year the conversion happens, but it allows the money to grow tax-free thereafter.
Is a Roth conversion right for you? There are some important considerations to keep in mind before deciding to convert to a Roth:
1. Anticipated higher tax brackets
You might expect to be in a higher tax bracket during retirement if you have a pension. Even if your current tax bracket remains constant, factors like Social Security, required minimum distributions (RMDs) and investment withdrawals could elevate your taxable income.
Also, with tax rates among historical lows, many people suggest tax rates might only increase. A Roth conversion allows you to lock in today’s lower tax rates, potentially saving money in the long run.
Example: Consider a retiree who receives $60,000 from a pension and an additional $30,000 from Social Security. Adding RMDs could push them into the same or higher tax bracket than when they were working, increasing their overall tax liability each year.
2. Impact on Medicare premiums (IRMAA)
Medicare Part B and D premiums are determined by your income level, where higher income results in higher premiums because of the income-related monthly adjustment amount, known as IRMAA.
Retirees could lower their Medicare premiums by reducing taxable income through Roth conversions, an often-overlooked saving.
Example: A retiree with a high pension might see a significant increase in Medicare premiums, while strategic Roth conversions can ease this financial burden.
3. Avoiding the Social Security tax torpedo
The term "Social Security tax torpedo" refers to the surprisingly high taxes retirees can face on Social Security benefits due to their provisional income. For some, up to 85% of their benefits may become taxable.
Roth conversions can strategically reduce provisional income, thus minimizing taxable Social Security benefits. By carefully planning Roth conversions, retirees can reduce their provisional income and potentially reap significant tax savings on their Social Security benefits.
4. Unnecessary RMDs and legacy planning
If you are fortunate enough not to need RMDs from your accounts to cover your expenses, converting to a Roth can make a lot of sense. Roth IRAs do not require withdrawals, allowing your investments to grow tax-free.
This strategy is particularly appealing if you wish to leave money as an inheritance for your loved ones.
Example: Consider a 60-year-old retiree with $1 million in a Roth IRA. This could compound to $5 million-plus by age 90, tax-free.
5. Mitigating the widow's penalty
Upon the death of a spouse, the surviving spouse often faces higher tax rates due to the loss of tax benefits associated with a "married filing jointly" status.
A Roth conversion can alleviate this widow’s penalty by easing the tax burden on the surviving spouse with tax-free funds available from a Roth IRA.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
Navigating retirement income strategies can seem daunting, but with proactive steps like Roth conversions, retirees can better manage their taxes and overall financial health. Strategic planning is extremely important if you have diligently saved and have a pension.
Our firm specializes in planning for what we call The 2% Club: those who have pensions and $1 million or more saved for retirement.
At the end of the day, the goal is not merely to have more money but to optimize the money you have through smarter planning. Understanding how a Roth conversion works and when it might make sense to implement offers a pathway to not only preserve your wealth but also to enhance your financial legacy.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Related Content
- Retiring With a Pension? Four Things to Know
- If You Have a Pension, Smart Tax Planning Should Start Now
- Should You Take Your Pension as a Lump Sum?
- Converting Retirement Savings to a Roth IRA? Don't Do This
- Here's Why You Shouldn't Put All Your Money Into Roth IRAs
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As Founder and CEO of Peak Retirement Planning, Inc., Joe Schmitz Jr. has built a comprehensive retirement planning company focused on helping clients grow and preserve their wealth. Under Joe’s leadership, a team of experienced financial advisers use tax-efficient strategies, investment management, income planning and proactive health care planning to help clients feel confident in their financial future — and the legacy they leave behind. Joe has also written two Amazon bestselling books, I Hate Taxes (request a free copy) and Midwestern Millionaire (request a free copy). You can find Joe on YouTube by clicking here, where he creates educational videos for those in or near retirement with $1M+ saved and pensions.
-
Don’t Miss Apple and Walmart Back-to-School Tax-Free Holiday Savings this Summer
Sales Tax Select states host sales tax holidays during the summer. Here’s what you can purchase.
-
The Rule of Retirement Inversion
The rule of retirement inversion says that to have a great retirement, you must ask yourself what would ruin a great retirement — and then plan to avoid it.
-
The Rule of Retirement Inversion
The rule of retirement inversion says that to have a great retirement, you must ask yourself what would ruin a great retirement — and then plan to avoid it.
-
The Five Best Side Hustles for Retirees
More older people are working in retirement to boost income and stave off boredom. These gigs and hustles make the most sense for the golden years crowd.
-
Sibling Bonds May Wax and Wane: Here's How To Safeguard Them
Sibling Bonds May Wax and Wane: Here's How To Safeguard Them
-
How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study
Susan discovered several years after she filed for Social Security that she is eligible to receive benefits based on her ex-spouse's earnings record. This case study explains how her new benefits are calculated and what her steps are to claim some of the money she missed.
-
From Piggy Banks to Portfolios: A Financial Planner's Guide to Talking to Your Kids About Money at Every Age
From toddlers to young adults, all kids can benefit from open conversations with their parents about spending and saving. Here's what to talk about — and when.
-
I'm an Investment Pro: Here's How Alternatives Could Inject Stability and Growth Into Your Portfolio
Alternative investments can often avoid the impact of volatility, counterbalancing the ups and downs of stocks and bonds during times of market stress.
-
Retirement in the Age of Cyber Scams: How To Protect Your Next Chapter
Retirement is meant to be a time of relaxation and living life on your terms. But for many retirees, this dream is under threat from a growing epidemic — cyber scams.
-
Dow Bleeds Red Due to Big Blue: Stock Market Today
Six of the official GICS sectors were in the green, led by communications services, technology and energy stocks.