Every dollar in your 401(k), 403(b), 457, or IRA came with a handshake: no tax now, full tax later. For forty working years, “later” was somebody else’s problem. Then you retire, and the calendar hands you a gift.
The window
Required minimum distributions — the IRS’s forced withdrawals from pretax accounts — do not start until age 73, or 75 if you were born in 1960 or later.
Between your last paycheck and that date, taxable income can fall to nearly nothing while your wealth sits at its peak. Retire at 63 and you may spend a decade in the lowest brackets since your first job.
We call it the tax mulligan — a do-over on decades of deferral decisions, granted once, with an expiration date printed on it. Most people let it close unused.
What it is for
Measured Roth conversions. Each window year, move money from pretax accounts into a Roth — an account that never produces taxable income again — and pay tax now at the low bracket. The craft is the word measured: fill the low brackets, then stop before the conversion spills into a higher one.
Harvesting the 0% gains rate. Below an income threshold, federal law taxes long-term capital gains at 0%. Window-year retirees can sometimes sell appreciated holdings, pay zero federal tax, and even buy them right back with a reset cost basis. California taxes gains as ordinary income, so the state side needs its own math.
Charitable timing. From age 70½, qualified charitable distributions send money from an IRA straight to charity. The gift counts against future RMDs and never appears in your income at all.
Defusing the widow’s penalty. When one spouse dies, the survivor keeps most of the income but files as a single taxpayer — harsher brackets at roughly half the income. Conversions made while two names are on the return shrink that future bill in advance.
Respecting the cliffs. Medicare premiums are means-tested: cross an IRMAA threshold — the income line that steps up both spouses’ premiums — by one dollar, and the bill rises for a full year. This is why one big conversion usually loses to a measured slice every year.
The cost of waiting
Do nothing and the RMD snowball arrives. The pretax balance compounds through your 60s, and then the withdrawal schedule applies a growing percentage to a grown balance.
Forced income lands whether you need it or not. It stacks on Social Security and pensions, pushes you into brackets you thought you retired away from, and trips the Medicare surcharges. The handshake gets honored either way. The only question is whether you pick the rate or the calendar does.
Picture a couple retiring at 63 with $1.8 million pretax. Path A: do nothing, and RMDs eventually arrive on a larger balance, taxed on top of two Social Security checks. Path B: convert a measured slice each year for a decade, stopping short of the next bracket and the Medicare thresholds. Same lifetime wealth, very different lifetime tax bill — and a far softer landing for the surviving spouse.
The mulligan fits three groups best: households with large pretax balances, anyone retiring several years before RMD age, and couples doing survivor planning. Career educators with decades of 403(b) and 457 deferrals are the classic profile.
There is nothing to buy. It is arithmetic with a deadline: your brackets, year by year, and a written order for which accounts fund your life meanwhile. Conversions are irrevocable, so bring your CPA — and your latest return — to the conversation.