Why Affluent Investors Over 60 Are Emptying Their 401(k)s Into a Roth Before the IRS Sets the Withdrawal Schedule

Retirees with large 401(k)s face a marginal tax rate near 40% at 75 when RMDs stack on top of Social Security and trigger IRMAA Medicare surcharges.

Ages 60 to 62 are the cheapest Roth conversion years because Medicare's two-year lookback means zero IRMAA cost on those conversions.

Married filers can convert up to $403,550 of taxable income in 2026 and stay within the 24% bracket, making six-figure annual conversions viable.

Picture a married couple, both 62, recently retired with about $1.6 million in a traditional 401(k), a paid-off house, and a plan to hold off on Social Security until age 70. Their taxable income this year is close to zero. Their 401(k) is the largest tax liability they own, and the IRS has already set the schedule for collecting it.

Because they were born after 1959, required minimum distributions start at 75. Until then, they control the timing. After that, the IRS does. The most expensive mistake happens years before the first distribution: letting the low-income window close without converting.

For 2026, a married couple filing jointly gets a $32,200 standard deduction. With no wages coming in, every converted dollar above that deduction fills the lowest brackets first.

The 22% bracket tops out at $211,400 of taxable income. The 24% bracket extends to $403,550, and only above that does the 32% rate begin. This couple can move a six-figure sum into a Roth each year without leaving the 24% bracket.

Leave the $1.6 million alone and it compounds tax-deferred. At 75, the first RMD adds on top of two full benefit payments and any portfolio income, setting off a tax cascade.

Up to 85% in Social Security benefits becomes taxable once a couple's combined income passes $44,000. Each extra RMD dollar can drag more benefit into taxable income, so a couple nominally in the 22% bracket can hit a marginal rate around 40%.

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A second layer comes from Medicare. IRMAA surcharges of roughly $70 to $400+ per month per person are set by income from two years earlier. Large RMDs can keep a couple paying surcharges for the rest of their lives.