Retirement should be your reward, not a time to worry about the IRS taking more than their fair share. But with the 2017 Tax Cuts and Jobs Act set to expire at the end of 2025, the window for historically low tax rates is closing fast. In response, Roth IRA conversions jumped 46% last year, and Google search interest in “Roth conversion” hit a 10-year high. People are proactively locking in tax-free income before the rules change, and you can too.

This guide walks you through the key tax-free retirement income strategies inspired by UnStress & UnTax Your Retirement™, including the powerful Roth conversion recipe, under-the-radar income tools like Modern Life Insurance™, and planning essentials for surviving spouses and Required Minimum Distributions (RMDs).

The goal? To help you keep more of your retirement dollars, and live Your Life, Your Way™.

Should You Convert to a Roth IRA Now?

With the 2018 tax cuts sunsetting soon, converting traditional IRAs to Roth IRAs has become a hot strategy, and for good reason. When you convert, you pay taxes now (at known rates), in exchange for forever tax-free growth and withdrawals.

Imagine this: You’re in a 22% bracket now. You convert $100,000 from a traditional IRA to a Roth IRA. You pay $22,000 in taxes today. But that money, and all future growth, is now off-limits to Uncle Sam. The tax-free growth compounds year after year, helping you preserve more wealth over the long haul.

If you wait, that same conversion could cost you thousands more when brackets reset higher in 2026. Many retirees underestimate how much their future RMDs will push them into higher brackets, especially once Social Security and Medicare surtaxes (IRMAA) are factored in.

Benefits of a Roth Conversion:

• No Required Minimum Distributions (RMDs)
• Tax-free income in retirement
• Income doesn’t affect Medicare IRMAA or Social Security taxation
• Assets pass tax-free to heirs
• Tax diversification when managing withdrawals

Smart Roth Conversion Timing:

• During lower income years (e.g., after retirement, before RMDs begin)
• Before 2026 tax hikes
• While both spouses are alive (to avoid single filer brackets)

Real-World Strategy: Let’s say you’re recently retired at age 64. You plan to delay Social Security until age 70. That gives you a 6-year window to fill the 22% tax bracket with strategic Roth conversions. Each year, you convert enough to maximize the bracket without spilling into 24%. Over time, you build up a sizable Roth balance that grows tax-free and reduces future RMDs.

Pro Tip: Work with a CPA or advisor to create a multi-year Roth conversion ladder to stay within your target tax bracket.

Modern Life Insurance™: A Tax-Free Income Tool

Thanks to the SECURE Act, many retirees are reconsidering what they leave behind, and how to do it tax-efficiently. Modern Life Insurance™ is emerging as a flexible, multi-use tool that can:

• Replace lost income for a surviving spouse
• Cover future long-term care needs
• Pass on tax-free wealth to heirs

Unlike old-school policies, Modern Life Insurance™ offers living benefits. That means you can access the policy’s cash value while you’re alive through tax-free policy loans. It can serve as a volatility buffer during down market years, allowing you to draw income without selling depressed investments.

Real-world example: A 60-year-old male, preferred health rating, funds $300,000 into a Modern Life Insurance™ policy over three years. That yields a $1,000,000 tax-free benefit guaranteed to age 96, with $800,000 accessible for long-term care.

Compare that to leaving a $1M IRA to heirs under the 10-Year Rule, they could lose up to 37% in taxes. The same amount in a Modern Life policy? 100% tax-free.

Common Objections Addressed:

• Isn’t life insurance expensive? Not when properly structured. Many policies allow return of premium or flexible pay schedules.
• What if I don’t need LTC? Your family still receives the full tax-free death benefit.
• Isn’t it complicated? Not with the right advisor. When designed properly, Modern Life Insurance™ can be one of the simplest tools in your plan.

The Widow’s Tax Penalty: Planning for Your Spouse

One of the biggest retirement tax surprises? The Widow’s Penalty.

Here’s the scenario: A couple retires and plans withdrawals based on joint tax brackets. But if one spouse dies, the survivor files as a single taxpayer, often pushing their effective tax rate significantly higher.

Example:

• Married couple income: $108,000 – Tax: $8,600 (8%)
• Surviving spouse: Same income – Tax: $16,400 (15%)

That’s nearly double the tax bill on the same income.

How to Avoid It:

• Convert to Roth while both spouses are alive
• Use Modern Life Insurance™ to replace lost income tax-free
• Consider a second-to-die policy to protect heirs

Case Study Insight: We once helped a Villages couple convert $500k in IRAs into Roths over five years while funding a $750k Modern Life Insurance™ policy. The surviving spouse now has tax-free income, no RMDs, and peace of mind.

This isn’t just a tax move, it’s a love letter to your spouse.

RMD Rule Changes: Use Them to Your Advantage

The SECURE 2.0 Act raised the age for Required Minimum Distributions (RMDs) to 73, giving retirees more time to convert to Roth IRAs or draw from other assets.

This delay can be a huge opportunity for tax planning, especially for Villagers who retire early.

From ages 60–72, consider:

• Drawing from traditional IRAs to fill lower tax brackets
• Converting to Roth gradually
• Reducing future RMD amounts and related taxes

Example: Let’s say you retire at 62 with $1.2M in traditional IRAs. Without action, your RMDs at 73 could be over $50,000/year, added to Social Security and taxable income. But if you start converting $80k/year now, your RMDs could drop by half, saving you and your heirs thousands.

But beware: Miss an RMD and the IRS penalty is 25% (down from 50%, but still steep!).

RMDs also impact Medicare premiums. IRMAA surcharges can hit hard if you exceed certain income thresholds, another reason Roth and life insurance strategies matter.

Take advantage of this planning window while you can. Once RMDs kick in, your flexibility narrows.

FAQs About Tax-Free Retirement Income

What is a Roth IRA conversion and how does it work?

A Roth IRA conversion moves money from a taxable traditional IRA into a tax-free Roth. You pay taxes on the conversion now, but future growth and withdrawals are tax-free for life.

How can life insurance be used for retirement income?

Modern Life Insurance™ allows you to borrow against the cash value tax-free while living and provides a tax-free death benefit to heirs. It also helps offset taxes on IRA distributions or replace income for a surviving spouse.

Can I do a Roth conversion after age 72?

Yes, but once RMDs start, you must take your full RMD first before converting additional IRA dollars. Earlier conversions (in your 60s) are often more efficient.

What’s the best age to convert to a Roth IRA?

Usually between ages 60–72, when you’re retired but before RMDs begin, and while tax brackets are still low.

Is there a penalty for missing an RMD?

Yes, as of SECURE 2.0, the penalty is 25% of the amount you should have withdrawn. Avoid this by planning RMDs with a trusted advisor.

How do I choose between life insurance and Roth for legacy planning?

Both have strengths. Roths provide tax-free growth and no RMDs. Life insurance gives tax-free lump sums and living benefits. Many retirees benefit from using both.