Every Year a Retiree Skips a Roth Conversion Before 73 Costs About $3,500 in Extra Tax Later. Here’s the Math on the Average $167,970 Balance.
A retiree who skips converting a portion of their traditional IRA during the pre-determined "gap years" could face an extra $3,500 in taxes later on. This comes from the discrepancy between the tax rate that applies to traditional IRA withdrawals versus the tax rate during a Roth conversion. The average 401(k) balance reached $167,970 at year-end 2025, according to Vanguard's How America Saves 2026 report.
For those who reach the required beginning age (RBA) for RMDs at 73, skipping a conversion could result in a significant tax difference later. The conversion tax is known and can be calculated, whereas the future tax rate is uncertain. Additionally, conversions raise modified adjusted gross income, which can affect Social Security benefits and Medicare premiums.
The head of the $167,970 average balance provides a solid baseline for calculating the potential tax savings from conversions.
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