Quick Read
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Converting $600,000 in $75,000 annual increments locks in tax rates below 22% before required minimum distributions combine with Social Security at age 73.
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Spreading conversions beneath the $218,000 IRMAA threshold avoids Medicare surcharges that can reach $6,900 per person, as any excess triggers the full cliff penalty.
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Delaying Social Security to age 70 increases the benefit by 8% annually while keeping taxable income low, maximizing Roth conversion headroom during the planning window.
A 63-year-old couple with $1.5 million in a traditional 401(k) and no earned income has entered their most valuable tax-planning window. From now until age 73, when required minimum distributions begin, they control exactly how much taxable income they recognize each year. Many retirees fill that window with modest IRA withdrawals and a delayed Social Security claim—a decision that can cost tens of thousands in avoidable taxes.
The strategy: convert roughly $75,000 per year from the traditional 401(k) to a Roth IRA over eight years, moving $600,000 total. Executed correctly, the tax bill on that $600,000 remains well below what the IRS would collect once RMDs stack on top of Social Security after 73.
Filling the 12% and 22% Brackets on Purpose
For a married couple filing jointly in 2026, the standard deduction is $32,200. The 12% bracket extends to $100,800 of taxable income, and the 22% bracket extends to $211,400. A couple with no other income can convert about $133,000 and remain entirely within the 12% bracket, or convert $243,600 and stay within the 22% bracket.
The IRMAA Trap Kills Aggressive Conversions
Medicare uses a two-year lookback on modified adjusted gross income. Converting too much at 63 triggers surcharges at 65. The standard 2026 Part B premium is $202.90 per month, but joint filers with MAGI above $218,000 pay $284.10, with surcharges climbing across five tiers to more than $6,900 per person at the top.
This is why splitting $600,000 into eight $75,000 conversions beats a single $300,000 conversion. Concentrating the income turns a smart move into a five-figure penalty; spreading it either avoids the surcharge entirely or triggers only the lowest tier for a single year. IRMAA tiers are cliffs—being $10 over the line costs the same as being $10,000 over.
Social Security Timing Sharpens the Math
Each year a benefit is delayed past full retirement age adds roughly 8% to the check up to age 70. Delaying Social Security to 70 keeps taxable income low during the conversion years, preserving more headroom under the bracket ceilings. It also yields a larger lifetime benefit, indexed by the 2026 COLA of 2.8% and each subsequent adjustment.
Once benefits begin, up to 85% of Social Security becomes taxable when combined income crosses certain thresholds. Roth withdrawals do not count toward combined income. Every dollar in a Roth at 73 is a dollar that stays out of the provisional income formula that pulls Social Security into taxation.
Why 2026 Is a Rare Setup
The rate environment favors conversions. The Fed funds target upper bound sits at 3.75%, and the 10-year Treasury yields nearly 5%, near a 12-month high. Bonds held inside a traditional 401(k) generate taxable interest at those higher rates, compounding the RMD problem. Moving that bond sleeve into a Roth now allows the interest to grow tax-free for the remainder of the account’s life.
Inflation is nudging brackets higher each year, and core PCE at 130.08 sits in the 90th percentile of the past year. Bracket ceilings will keep lifting, giving each successive conversion slightly more room at the same marginal rate.
Three Actions Before Year-End
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Set the ceiling, then convert to it. Add up projected pension, part-time work, taxable dividends, and interest. Subtract that total from $243,600 (the top of the 22% bracket plus the joint standard deduction). The result is the maximum conversion this year without leaving the 22% bracket.
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Verify the IRMAA line before submitting the transfer. If MAGI will exceed $218,000 for joint filers, stop one dollar below the tier boundary. Two years from now, that discipline is worth roughly $1,000 per spouse in Part B and Part D surcharges avoided.
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Convert in late fall rather than early in the year. By November, the year’s dividends, mutual fund capital gains distributions, and any wages are known. Guessing in January routinely creates a five-figure overshoot into the next tax or IRMAA tier that cannot be undone under current law.
