Suze Orman on Shrinking Your IRA Before RMDs Force a Bigger Tax Bill

Jeremy Phillips

Updated Tue, September 22, 2026 at 9:31 PM UTC

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Quick Read

Suze Orman advises converting above-RMD traditional IRA withdrawals into a Roth, preserving tax-free growth and sparing heirs a larger future tax bill.
Converting at a 22% rate saves $13,000 per $100,000 compared to heirs withdrawing the same money at a 35% rate.
The strategy reverses entirely if heirs are in a lower bracket than the retiree, in which case leaving the traditional IRA untouched becomes the cheaper outcome.
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If you are in your 70s with a sizable traditional IRA and adult kids in their peak earning years, the question of when to pull money out is worth more than most stock picks you will ever make. On a recent episode of her podcast, a listener named Jean wrote in saying her financial advisor suggested she start reducing her IRA above the required minimum distribution, parking the proceeds in an account her children could inherit. Suze Orman pushed back hard. Her counter-strategy is the one worth studying.

Here is the exact framing Suze gave: "You should take additional money out above the RMD, no problem. But you should convert it to a Roth IRA in your name. You should let it grow tax free." She added the protective logic behind it: "You do not know what your life is going to be at 83, at 93, at 97."

The verdict: shrink the IRA, but route it through a Roth

Jean's advisor was directionally right and tactically wrong. Pulling money out of a traditional IRA above the RMD can save a meaningful amount in taxes, but only if the dollars land somewhere they can keep compounding tax-free. Parking the withdrawal in a regular brokerage account, as the advisor suggested, wastes the most valuable real estate in the tax code.

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Here is the math that matters. Take a 75-year-old in the 22% federal bracket with a $1 million traditional IRA. Under the SECURE Act, when she dies, her adult children (non-spouse heirs) must drain the inherited IRA within 10 years. If those kids are doctors, lawyers, or dual-income professionals in their 50s, they are very likely in the 32% or 35% bracket. Every $100,000 distributed to them is taxed at their rate, not hers.

Run the numbers. $100,000 withdrawn now at 22% costs $22,000 in tax. The same $100,000 forced out to heirs at 35% costs $35,000. That is a $13,000 gap on every $100,000, and the gap widens further when you stack state income tax on top in places like California or New York.

Now layer in the Roth conversion piece. If she takes the $100,000 above her RMD, pays the $22,000 in tax from outside funds, and converts the remaining $78,000 into a Roth, that Roth carries no RMDs while she is alive. With the 10-year Treasury now yielding close to 5%, even a conservative Roth allocation can compound meaningfully over the 17 to 20 years Suze referenced for someone in their early 70s. When the heirs eventually inherit the Roth, they still face the 10-year drain rule, but every dollar comes out tax-free.

One additional factor worth building into the math: the One Big Beautiful Bill Act, signed into law on July 4, 2025, created a new $6,000 deduction for taxpayers age 65 and older for tax years 2025 through 2028. The deduction stacks on top of the standard deduction whether or not you itemize, and married couples where both spouses qualify can claim up to $12,000 combined. The deduction begins to phase out for single filers with modified adjusted gross income above $75,000 and joint filers above $150,000, disappearing entirely at $175,000 for single filers and $250,000 for joint filers. For those who qualify in full or in part, this extra deduction can meaningfully widen bracket headroom, making it possible to convert more dollars at the 22% or 24% rate before hitting the 32% threshold.

The variable that flips the answer

The single factor that determines whether this strategy pays off is the spread between the retiree's current bracket and the heir's projected bracket during the 10-year withdrawal window.

If your kids are in the 12% bracket and you are in the 24% bracket, the math reverses entirely. Accelerating withdrawals now means paying tax at a higher rate than your heirs ever would, turning the Roth conversion from a winning move into a losing one. In that case, leaving the traditional IRA alone and letting heirs drain it gradually over 10 years produces the cheaper outcome.

If your kids are in the 32% or 35% bracket and you are sitting in the 22% or 24% bracket, the spread is wide enough that every dollar moved out at your rate is a dollar saved. That is the situation Suze was addressing, and it is the situation most retirees with seven-figure IRAs and professional-class adult children actually face.

One timing point worth noting: SECURE 2.0, signed into law in December 2022, raised the RMD starting age from 72 to 73 for anyone born between 1951 and 1959. It rises again to 75 for those born in 1960 or later, beginning in 2033. That later start date creates additional years of potential Roth conversion runway before mandatory distributions kick in. The case for acting sooner rather than waiting until the RMD clock forces your hand is stronger than ever.

What to do this week

Pull last year's Form 1040 and find your marginal bracket. Then ask your adult children, plainly, what bracket they are in. You cannot run this math without both numbers.
Calculate the "bracket headroom" you have left. Find the dollar amount that would fill the top of your current bracket without pushing you into the next one. That is the maximum you should convert in a single year. If you are 65 or older and qualify for the OBBBA senior deduction, factor that additional deduction into your headroom calculation, keeping in mind the phase-out range.
Convert above the RMD into a Roth in your name, not a taxable account. The RMD itself cannot be converted, but anything beyond it can.
Pay the conversion tax from non-IRA money. Otherwise you shrink the Roth before it ever starts compounding.
Name your kids or grandkids as Roth beneficiaries. They still face the 10-year rule, but every withdrawal comes out tax-free.

Jean's advisor saw the right problem: a traditional IRA is a tax bill waiting to detonate on whoever inherits it. Suze's fix is the one worth copying. Shrink the IRA, yes, but route every dollar you pull out into a Roth. The money keeps working while you are alive and lands tax-free in your heirs' hands when you are not.

Editor's note: The 10-year Treasury yield reference was updated from approximately 4.7% to close to 5%, reflecting rates as of mid-September 2026.