Here’s a question most people never ask themselves:
“Do I want to choose when I pay taxes, or do I want the government to choose for me?”
For many retirees, this question matters more than how much money they saved. Taxes don’t just show up once. They follow you every year in retirement. If you don’t plan ahead, the IRS decides the timing, the amount, and the rules.
That is where annuities that allow for Partial Roth Conversions can come into play. This strategy is not about avoiding taxes. It is about controlling them and making your retirement income more predictable.
A Common Retirement Situation Many Couples Face
Let’s look at a very typical retiree couple. They are both 60 years old. They did a great job saving. Like most people, almost all of their money is in a Traditional IRA.
That means their money is tax-deferred. It also means the IRS is quietly waiting. Every dollar they take out later will be taxable. Required Minimum Distributions will eventually force withdrawals, whether they need the income or not.
In this example, we are keeping things simple. We are using today’s tax brackets, no state income tax, and constant rates. Real planning should always be coordinated with a CPA, Social Security timing, and Medicare premiums.
Annuities with Partial Roth Conversions
In this example, the couple uses $500,000 of their traditional IRA to fund a deferred income annuity at age 60. The income starts at age 70.
Based on rates in January 2025, deferring that income for 10 years produces a guaranteed $80,000 per year in joint lifetime income. Mortality is assumed to age 95.
Here is the key part. Before the income starts, the annuity allows internal Partial Roth Conversions. The annuity company creates a mirrored policy with the same features. Each year, a portion of the annuity is converted from Traditional IRA funds into a Roth.
How the Partial Roth Conversion Strategy Works
From ages 60 to 69, the couple converts $50,000 per year from their IRA Annuity into the mirrored Roth Annuity.
Each conversion stays fully in the 22% tax bracket. That means:
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- $50,000 converted per year
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- $11,000 paid in taxes each year
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- Taxes paid out of pocket
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- 10 years of conversions
Over 10 years, they have paid $110,000 in total taxes.
This can feel uncomfortable at first. Paying taxes today feels like a loss. But this trade-off creates certainty and long-term control.
What Happens If They Do Nothing Instead
Now let’s look at the other option. The couple does no Roth Conversions. They wait and simply take the same income later. Whether in an income annuity or just withdrawing does not make a difference.
At age 70, they withdraw $80,000 per year from the Traditional IRA, along with Social Security. With today’s brackets, this keeps them in a 15% marginal tax bracket.
That sounds better on the surface. Lower tax rate. No taxes paid upfront.
But over time, the math tells a very different story.
Comparing Lifetime Taxes Paid
Here is what the numbers look like if the couple lives to age 95.
| Strategy | Annual Tax | Years | Total Taxes Paid |
| No Roth Conversions | $12,000 | 25 | $300,000 |
| Partial Roth Conversions | $11,000 (10 yrs) | 10 | $110,000 |
The difference is $190,000 in lifetime taxes.
Same income. Same money. Very different outcome.
This is why Roth Conversions are not about chasing returns. They are about managing taxes over time.
Why Paying Taxes Earlier Can Make Sense
Most people resist this idea because of loss aversion. Paying taxes now feels painful. Paying taxes later feels far away and uncertain.
But taxes are coming either way. This strategy is not about paying extra taxes. It is about choosing when you pay them and how predictable they are.
Think of it like choosing a fixed mortgage instead of an adjustable rate. You are not avoiding the cost. You are choosing certainty instead of surprise.
What If Tax Rates Go Down Later?
Some people assume taxes will be lower in the future. This is optimism bias.
The reality is that the country is over $38 trillion in debt. Unfunded liabilities like Social Security and Medicare are over $100 trillion. Have you ever checked out the live US Debt Clock? You should! Plus, only 2.7 workers are supporting every Social Security recipient, vs 42 workers per recipient in 1945.
Yes, tax rates could go down. However, there is little evidence that taxes will trend lower in the long-term. Planning assumes reality, not hope.
What If You Don’t Live Long Enough?
This is one of the most honest concerns people have. It makes sense to think this way.
If you do not live a long life, you still benefit from lower tax complexity while you’re alive. Plus, these annuities include death benefits. The taxes were already paid, which means your heirs receive the benefit tax-free.
Your children will likely be in higher tax brackets during their earning years. Paying the taxes now may save them more later.
However, if you do live a long life, failing to plan can be far more damaging.
Why Surviving Spouses Face Higher Tax Risk
One issue many couples overlook is what happens when one spouse passes away.
The surviving spouse is pushed into single filer tax brackets. That often means higher taxes on less income. This can also impact Medicare premiums.
Tax planning is not a bet on dying early. It is insurance against living longer.
Keeping the Strategy Simple
This strategy can sound complicated when explained all at once. Complexity often creates paralysis.
In reality, it happens in small steps:
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- One conversion per year
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- One decision at a time
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- Coordinated with a tax professional
Complexity is not the enemy. Unmanaged complexity is.
The Real Risk Most Retirees Face
The biggest tax mistakes in retirement are not dramatic. They are quiet. They happen one year at a time.
By the time people notice them, the damage is usually permanent. Once RMDs begin, the IRS controls the timeline.
If you are within 10 years of retirement, there is a narrow planning window. Small decisions during this time can permanently change your outcome.
Final Thoughts on Annuities with Partial Roth Conversions
This strategy is not about whether annuities are right for you. It is not even just about Roth Conversions.
It is about whether your income, taxes, and longevity are coordinated or left to chance.
Annuities with Partial Roth Conversions are one way to bring structure and predictability into that equation. Of course, you could do Roth Conversions in your retirement portfolio, but using a guaranteed income annuity takes many other retirement risks, such as longevity & sequence of returns risk, off the table.
Want to See How This Applies to You?
If you would like to see how annuities with Partial Roth Conversions could work using your actual numbers, and coordinated with your CPA, you can schedule a call.
You can also explore educational resources and videos that explain how these strategies fit into retirement income planning.
This type of planning can have massive long-term benefits for you, your spouse, and your family.
Episode 99: Use Annuities to Fund Roth Conversions Tax-Free
Download Episode 99: Use Annuities to Fund Roth Conversions Tax-Free on Apple Podcast.