Why Affluent Couples Are Converting $1.4M 401(k)s Into Roth Accounts Before Age 73

Retiring at 62 opens an 11-year window of near-zero taxable income before RMDs begin, representing a valuable tax-planning opportunity for affluent couples.

Why Standing Still Is the Expensive Choice

Without conversions, a $1.4M 401(k) doubles to ~$2.7M by age 73, triggering six-figure RMDs that push couples into the 22% to 24% tax bracket permanently. Layering in Social Security benefits can make up to 85% of those benefits taxable, increasing tax liability further.

The Bracket-Filling Play

Under 2026 tax rules, a married couple filing jointly can fill tax brackets strategically:

• 10% on the first $24,800 of taxable income
• 12% up to $100,800
• 22% up to $211,400

With the $32,200 standard deduction, the household can generate $243,600 in gross income while staying at the top of the 22% bracket. Converting $243,600 annually for seven years moves ~$1.7M into a Roth IRA at an effective tax rate of ~15%, resulting in a lifetime federal tax bill of ~$250,000—far less than the taxes owed on forced RMDs.

The IRMAA Trap

Medicare’s Income-Related Monthly Adjustment Amount (IRMAA) uses a two-year lookback. Income at age 63 determines Part B premiums at age 65. For 2026:

• Crossing $218,000 in modified adjusted gross income triggers an additional ~$75 per person monthly.
• Higher tiers increase premiums further.

The 22% tax bracket ceiling ($211,400 taxable income) sits just below the first IRMAA cliff. An exception exists for conversions in the year each spouse turns 62, as this year is excluded from the IRMAA lookback period. This is the ideal time to fill the 24% bracket up to $403,550 of taxable income.

Why the Rate Environment Favors Now

• The 10-year Treasury yield is ~4.57%, with the fed funds rate at 3.75%.
• Core PCE inflation remains elevated (130.08 in May 2026 vs. 126.43 a year prior).
• Persistent inflation erodes the real value of future RMDs, while current tax brackets and the standard deduction are fixed.

Waiting risks legislative changes after the 2028 election cycle.

Key Moves for This Quarter

• Model the year-62 conversion aggressively: Fill the 24% bracket up to $403,550 of taxable income, as this year avoids IRMAA lookback.
• Cap subsequent years at $211,400 taxable income: Stay within the 22% bracket and below the $218,000 IRMAA threshold.
• Pay conversion taxes from a taxable brokerage account: Avoid shrinking the 401(k) balance, ensuring maximum tax-free growth for both spouses and heirs.