A traditional IRA is a tax-advantaged account whose role in retirement planning depends on when withdrawals occur, how tax brackets evolve, and which account is spent first. A Roth conversion moves traditional IRA funds into a Roth IRA; taxes are paid in the conversion year, and each conversion generally carries a five-year holding rule. section 9.2.6
Using conversions to stabilize tax brackets
A withdrawal strategy can take money from the traditional IRA up to the top of the 12% bracket, convert that amount to a Roth IRA, and use the taxable account for spending. In the stated assumptions, this Roth-conversion strategy lasted 53.2 years, compared with 40.0 years for spending the IRA first and 48.7 years for spending the taxable account first. section 9.2.6
Key planning rules include:
- Anyone, regardless of income, can convert an unlimited amount of a traditional IRA into a Roth IRA, subject to taxes in the conversion year. section 9.2.6
- Converted funds withdrawn within five years and before age 59½ will generally incur a 10% penalty on the converted principal. section 9.2.6
- Inheritance planning depends on tax brackets: a lower-bracket owner may deplete the traditional IRA first, while a higher-bracket owner may preserve it for beneficiaries. section 9.3.2
Table 9.5 Comparison including the Roth conversion strategy
| Strategy | Number of years money lasts |
| IRA first, then taxable | 40.0 |
| Taxable first, then IRA | 48.7 |
| Fill 12% bracket first | 44.5 |
| Roth conversion | 53.2 |
Compare how traditional-IRA withdrawal and conversion strategies affect the modeled number of years assets last. section 9.2.6
