Traditional IRA vs. Roth IRA: What Changes When You Near Retirement

Traditional IRA vs. Roth IRA: what changes when you near retirement? The biggest change is timing. Earlier in your career, the choice is mostly about taking a tax break now or later. In your late 50s and 60s, it becomes about which account you draw from first, whether a Roth conversion makes sense, and how required minimum distributions, Medicare premiums, and Georgia's retirement exclusion fit together.

Key takeaways

• For 2026, the IRS limits total IRA contributions to $7,500, plus a $1,100 catch-up if you are 50 or older. That limit is shared between traditional and Roth IRAs.
• Traditional IRA owners generally must start required minimum distributions (RMDs) at 73 (75 for people born in 1960 or later). Roth IRA owners have no RMDs during their lifetime.
• A Roth conversion is taxable income in the year you convert, and a conversion made on or after January 1, 2018 cannot be undone.
• Extra taxable income can raise your Medicare premiums and can make more of your Social Security taxable.
• Georgia lets each qualifying person exclude up to $35,000 (ages 62–64) or $65,000 (65 and older) of retirement income, including taxable IRA distributions.

Traditional IRA vs. Roth IRA: the basic difference

With a traditional IRA, contributions may be tax-deductible, the money grows tax-deferred, and withdrawals are taxed as ordinary income. If you are covered by a workplace plan, the deduction phases out at higher incomes (for 2026, $81,000–$91,000 for single filers).

With a Roth IRA, you get no deduction up front, but qualified distributions are tax-free. Under IRS rules, a distribution is qualified when it has been at least five years since your first Roth IRA contribution and you are 59½ or older (or the distribution is due to disability or death, among a few other cases). For 2026, the ability to contribute directly phases out between $153,000 and $168,000 (single) and $242,000 and $252,000 (married filing jointly).

Feature	Traditional IRA	Roth IRA
Tax break	Possible deduction now	No deduction now
Withdrawals in retirement	Taxed as ordinary income	Qualified distributions are tax-free
2026 contribution limit	$7,500 combined ($8,600 if 50+)	Same shared limit
Income limit to contribute	None to contribute; deduction may phase out	Phases out at $153,000–$168,000 single / $242,000–$252,000 joint
Lifetime RMDs	Yes, starting at 73 (75 if born 1960 or later)	None while the owner is alive
Effect on Medicare premiums and Social Security tax	Withdrawals raise your income	Qualified withdrawals don't add to taxable income
Georgia treatment	Taxable IRA income can count toward the retirement exclusion	Qualified distributions generally aren't taxable

What changes as retirement gets close

1. Your tax picture gets clearer

At 58 or 62, you can make a real estimate of your retirement income: Social Security, any pension, part-time work, and savings withdrawals. If your income will drop a lot, a traditional IRA deduction today may be worth more. If it will stay about the same, or rise once RMDs begin, Roth money looks better. Also remember that a surviving spouse usually files as single, so the same income can be taxed at higher rates.

2. Required minimum distributions start to matter

The IRS generally requires you to start taking money out of a traditional IRA at 73. If you miss an RMD, you may owe a 25% excise tax on the amount you should have taken (10% if corrected within two years). Big balances can mean big forced withdrawals. Roth IRAs have no RMDs while you are alive, though beneficiaries have distribution rules.

3. The Roth five-year clock

If you open your very first Roth IRA at 58, the earnings won't be qualified until five years have passed, even after you turn 59½. Your own contributions come out first, and those are not taxed.

4. Ripple effects on Medicare and Social Security

Social Security generally uses your tax return from two years earlier to decide if you pay a higher Medicare premium (IRMAA). For 2026, higher premiums start above $109,000 of modified AGI for individuals or $218,000 for joint filers.

Traditional IRA withdrawals also count toward the "combined income" that decides whether Social Security is taxed. Per SSA, benefits can be taxed once it passes $25,000 (individual) or $32,000 (joint).

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Roth conversions near retirement: honest pros and cons

A Roth conversion moves money from a traditional IRA into a Roth IRA, and you pay income tax on it now. Many people look at this in the "gap years" after they stop working but before RMDs begin, when income may be lower.

Possible upsides:

• Future qualified withdrawals are tax-free.
• Smaller traditional balances can mean smaller RMDs later.
• Roth money can be easier to leave to heirs.

Real downsides:

• You pay the tax now, ideally from other savings, not from the IRA itself.
• A conversion made on or after January 1, 2018 cannot be reversed.
• Each conversion has its own five-year period. If you are under 59½ and withdraw converted money within five years, a 10% additional tax can apply.
• The added income can raise Medicare premiums two years later.

Georgia follows the federal rules on IRA conversions, and taxable IRA income can count toward the state retirement exclusion once you are 62. I break down the state rules in Is Retirement Income Taxed in Georgia? Because the timing of Social Security also changes your tax picture, see Claiming Social Security at 62 vs. 67 vs. 70.

Where insurance products fit (and where they don't)

To be clear: I am not a securities broker, CPA, or tax advisor. I don't open IRAs, pick investments, or decide conversions. Run those numbers with a qualified tax professional.

Where I can help is the insurance side. Some people use a fixed or fixed-indexed annuity inside an IRA for money they want protected from market losses, or for lifetime income. An IRA is already tax-deferred, so the annuity adds no extra tax deferral, and annuities have surrender charges, possible rider fees, and a 10% IRS penalty before 59½. Others who earn too much for a Roth IRA look at indexed universal life (IUL). IUL policy loans and withdrawals are generally income-tax-free when the policy is properly structured, funded, and kept in force, and is not a modified endowment contract. IUL costs more than an IRA and isn't for short-term money.

Which one fits you?

A traditional IRA may fit if you:

• Are in a higher tax bracket now than you expect to be in retirement.
• Want the deduction to lower this year's taxes.

It may not fit if large RMDs could push you into a higher bracket or higher Medicare premiums later.

A Roth IRA may fit if you:

• Expect similar or higher tax rates in retirement.
• Want no lifetime RMDs and more control over your taxable income.
• Want to leave tax-free money to a spouse or children.

It may not fit if you need the deduction now, your income is above the limit, or you would have to pay conversion taxes out of the IRA itself.

Many retirees end up with both, which gives them choices each year.

FAQ

Can I still contribute to a Roth IRA after I retire?

Only if you (or your spouse, if filing jointly) have taxable compensation, such as wages, and your income is under the limit. Pensions and Social Security don't count.

Is it too late to do a Roth conversion at 65?

There is no age limit on conversions. Whether paying tax now saves you more later depends on your bracket, Medicare premiums, and heirs, so review it with a tax professional.

Does Georgia tax Roth IRA withdrawals?

Qualified Roth distributions aren't federally taxable, and Georgia generally follows federal IRA treatment. Confirm with your tax preparer.

If you live in Georgia and want a second set of eyes on your retirement income plan, let's talk.

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Tai Nguyen is a licensed life insurance agent in Georgia (License #3784707, NPN 21496686). This article is for educational purposes only and is not tax, legal, or investment advice. Consult a qualified tax professional about your situation. Insurance and annuity guarantees are backed by the claims-paying ability of the issuing insurance company. Annuities and life insurance are not FDIC insured. Retire With Tai serves Georgia residents only.