The prescription from the hosts of Your Money, Your Wealth, episode 579, is direct: “I would convert $100,000 a year or a little bit more to get them to the top of the 22%. And I would do that for a few years.”
They have too much money in tax-deferred accounts and not enough years left to fix it before required minimum distributions hit like a freight train. When a couple has this much pretax money sitting in 401(k)s, combined with a narrow runway before Social Security kicks in, the playbook is clear: use the low-income window to shrink the pretax pile on your own terms.
The strategy works, the math is sound, and if you have a seven-figure 401(k) balance and a few quiet income years between retirement and Social Security, the opportunity is worth taking seriously.
The Couple Behind the Question
Todd is 54. Margo is 53. Empty nesters who split time between a valley home and a mountain home, both paid in full. Margo retired in 2024. Todd plans to retire in 2026.
Their balance sheet tells the story:
- $2,300,000 in 401(k)s, the pretax pile that drives the entire conversion problem.
- $1,100,000 in a taxable brokerage account, which becomes the bridge that pays the conversion tax bill.
- $800,000 in a defined contribution plan (DCP) with a 10-year annual payout, a deferred-comp arrangement that drips income out steadily.
- $500,000 in Roths already, plus $150,000 in an HSA.
- 3 rental properties with $1,000,000 total equity and $1,500 per month in cash flow.
Social Security arrives for Margo at 67 and Todd at 70, with a combined annual benefit of $105,000. They want $200,000 pretax in retirement spending.
A DCP is a deferred compensation plan, here structured to pay out over a decade. An RMD is the required minimum distribution the IRS forces you to take from pretax accounts later in life, taxed as ordinary income. For Todd and Margo, born after 1959, that clock starts at age 75 under the SECURE 2.0 Act. The bigger the pretax pile when RMDs start, the larger the tax hit.
As one host put it: “They’ve done a really good job of saving close to $5,000,000 of liquid assets at 54 and 53. Amazing.”
Can Todd Actually Retire?
Yes. The DCP throws off roughly $80,000 annually over 10 years, and net rental income tops that off. Against the $200,000 spending goal, the shortfall gets pulled from their liquid assets at a pace the math easily supports.
One host’s read: “That’s a 2.6% distribution rate on $3,900,000. Yeah, I’m okay with that.” His co-host added, “No debt. They can kind of vary their spending. $200,000, that’s healthy.”
A withdrawal rate under 3% sits well below the conventional 4% rule. The DCP runs dry in a decade, and Social Security shows up shortly after to replace most of that income.
Why $100,000 a Year, and Why the 22% Bracket
With Todd retired and the DCP feeding $80,000 of taxable income, the couple lands in the 12% tax bracket by default. Empty space sits above them all the way to the top of the 22% bracket. For married couples filing jointly in 2026, that bracket tops out at $211,400 in taxable income, per IRS Revenue Procedure 2025-32. Conversion dollars filled into that space are taxed at known rates today rather than unknown rates after RMDs flip the switch. Notably, the One Big Beautiful Bill Act, signed into law in July 2025, made this bracket structure permanent, removing the sunset risk that had previously hung over long-range conversion planning.
The host laid it out: “I think once he retires this year, they got the DCP plan that’s going to give them $80,000 a year. They have $1,100,000 in taxable brokerage that they can use to supplement their income. They’re going to be in the 12% tax bracket.” Fill the 22% bracket with conversions. Pay the tax bill from the brokerage account.
The co-host pushed further. Wait until 2027, when Todd has no W-2 income at all, and you can “convert $100,000 to $120,000, $130,000” in that range.
There is a kicker for volatile markets. “If there is a dip in the market, a correction, you could convert a little bit more in that year because you got a lot of money in tax-deferred. It’d be nice to get a little bit more out than $100,000 a year.” Convert depressed shares, let them recover inside the Roth, and never pay tax on the rebound. With the Fed holding its target range at 3.50%-3.75% through mid-2026 and signaling a higher-for-longer posture, volatility windows remain realistic to plan around.
The Bridge You Cannot Drain
The taxable brokerage funds two things at once: conversion taxes and household spending until Social Security shows up. Drain it too fast and the whole plan collapses, because the couple would have to pull from the very 401(k)s they are trying to shrink.
The host was explicit: “I would just want to keep my taxable brokerage account in check. I wouldn’t want to deplete it.” A 3- to 4-year conversion run of at least $100,000 each year, paired with disciplined brokerage spending, is the shape of the plan.
Who Should Run This Play
This works if you are between roughly 55 and 65, retired or near it, with at least $1,000,000 in pretax accounts, taxable money outside the 401(k) to pay the conversion tax, and Social Security still several years away.
Two profiles cannot make it work. Anyone whose only money sits inside the 401(k) ends up withholding taxes from the conversion itself, shrinking the amount that lands in the Roth. Anyone already in the 24% or 32% bracket from pensions, rental income, or part-time work has no low-bracket headroom to fill in the first place.
What to Do This Week
Pull last year’s tax return. Find your taxable income line and the top of your current bracket. Then look at your 401(k) balance and ask whether RMDs in your 70s will push you into a higher bracket than the one you sit in now. If yes, and you have non-retirement money to pay conversion taxes, you have the same problem Todd and Margo do, scaled to your numbers.
The payoff, from the host: “You could get a good chunk, $700,000, $800,000 out. You could. RMD is not going to then kill you. It’s not going to pop them into a higher tax bracket. You can maintain that 22% tax bracket for a while and have, you know, maybe $1,500,000 sitting in Roth IRAs.”
Pay 22% now on your terms, or pay an unknown rate later on the IRS’s schedule. That is the whole point of $100,000 a year. The discipline is hitting it every single year until the window closes.
Editor’s note: This update added the 2026 married-filing-jointly 22% bracket ceiling of $211,400 from IRS Revenue Procedure 2025-32, noted that the One Big Beautiful Bill Act permanently extended that bracket structure, corrected the characterization of the Fed’s current policy stance from “easing cycle” to a higher-for-longer hold at 3.50%-3.75%, and added SECURE 2.0 context specifying that Todd and Margo’s birth cohort faces an RMD starting age of 75.
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