Suze Orman delivers financial advice with a blowtorch. On her October 10, 2024 podcast, a 65-year-old retired caller named Deb said her financial advisor had instructed her to leave her $125,000 TSP alone and wait until required minimum distributions forced her to touch it. Suze’s response: “the stupidest thing I ever heard.”
If you are between 60 and 72 with money sitting in a traditional 401(k), 403(b), TSP, or IRA, that single piece of advice can cost you tens of thousands in lifetime taxes. Suze is right, and the math is not subtle.
Why waiting is the wrong default
For most pre-retirees, the years between leaving work and the RMD start date are the lowest-tax window of your life. The paycheck stopped. Social Security may not have started yet. You are sitting in the 12% or 22% federal bracket instead of the 24% or 32% bracket you lived in during peak earning years. That gap is the whole opportunity.
Current rules set the RMD age at 73 for anyone born between 1951 and 1959, and 75 for those born in 1960 or later. A 65-year-old like Deb has roughly eight to ten years of low-tax runway to convert traditional dollars to a Roth or withdraw strategically. Waiting throws that runway away.
The math on Deb’s $125,000
I’ve been studying retirement tax mechanics for over a decade, and the pattern repeats: people who do nothing in their 60s get ambushed in their 70s. Picture Deb’s TSP growing at 7% annually for eight years until RMDs begin at 73. That $125,000 becomes roughly $215,000. The IRS then forces withdrawals based on her life expectancy, stacking on top of Social Security and any pension. Every dollar is taxed as ordinary income. Worse, the extra income can drag more of her Social Security into taxable territory and trigger the IRMAA Medicare surcharge.
Run the alternative. Deb converts $15,000 a year from her TSP to a Roth IRA for eight years. At a 12% federal bracket, each conversion costs her about $1,800 in tax. Total tax bill across the window: roughly $14,400. The converted money grows tax-free, comes out tax-free, and never carries an RMD attached.
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Compare that to leaving the account untouched. By her late 70s, with Social Security flowing and RMDs running, the same $15,000 withdrawal could be taxed at 22% or 24%. The waiting strategy can double her effective tax rate on the identical dollars.
