The Early Retirement Years Are a Tax Window Most People Walk Right Past It
For many retirees, the years between 62 and 72 are the quietest on the tax calendar. Social Security may be deferred. Required minimum distributions have not started. Income is often lower than at any point since the early working years.
The IRS records this as a taxable year. A thoughtful retirement plan treats it as a window.
Most people walk right past it.
Vanguard’s new retirement income framework addresses tax strategy with a clarity most retirees don’t encounter until it is too late. The sequence in which you draw from different account types — taxable accounts first, then tax-deferred accounts like traditional IRAs and 401(k)s, Roth accounts last — reduces cumulative lifetime taxes by roughly 14% compared to drawing proportionally from all accounts at once.¹ Over a 25-year retirement, 14% is a meaningful number.
But the more time-sensitive opportunity is Roth conversions. Vanguard’s analysis found that more than 80% of retirees can benefit meaningfully from converting pre-tax retirement dollars to Roth during the early retirement years, before required minimum distributions begin.¹
The mechanics are worth understanding. A Roth conversion moves money from a traditional IRA or 401(k) — where every withdrawal is taxed as ordinary income — into a Roth account, where it grows and is eventually withdrawn tax-free. You pay the tax on the conversion now, at the current rate. You never pay tax on that money again.
When income is low in the early retirement years, conversions can be done at the 12% or 22% federal bracket. Once required minimum distributions begin at age 73, forced withdrawals frequently push retirees into the 24% bracket or higher. For a surviving spouse filing as a single taxpayer, the resulting tax increase can be significant — and often comes as a surprise.
From a RISA® perspective, tax sequencing applies across all four income style profiles.² Whether your preference is total return or safety-first, whether you value optionality or commitment, the efficiency of how you withdraw affects every dollar that leaves the portfolio. Tax sequencing is one of the few places in retirement planning where careful, personalized modeling improves outcomes for nearly everyone, regardless of income style.
The caution: Roth conversions are not a universal prescription. The right amount to convert, and in which years, depends on your full income picture — Social Security timing, pension income, investment returns, healthcare subsidy eligibility, and legacy intentions. This is work that benefits from careful planning before RMDs begin, not after.
This concludes the four-part series. We began with the shift from accumulation to income. We built the floor. We addressed withdrawal rates. We identified the early tax window. None of these decisions stand alone — they interact. Building them together, inside a plan matched to how you actually want to live and what helps you sleep at night, is the work that makes retirement sustainable.
Your trusted advisor is ready to work through each of these decisions with you — not as a formula, but as a plan built for your household, your preferences, and the retirement you have worked toward.
Click here to schedule your 15-minute Retirement Fit Call.
Let's make sure your retirement journey is as secure and fulfilling as you envision.
