A $2.2 Million 401(k) Could Cost You $30,000 in Medicare Surcharges Without This Five-Year Roth Conversion Window

A 60-year-old single retiree sitting on $2.2 million in a traditional 401(k) and $400,000 in a taxable brokerage has roughly five quiet years before Medicare enrollment changes the tax math forever. Those years are the most valuable real estate on the retirement calendar, and most retirees waste them. The decision to convert, or not convert, traditional dollars to a Roth between 60 and 64 will quietly determine whether Medicare costs an extra $30,000 or more across retirement.

Here is the situation in plain numbers. The retiree plans to claim Social Security at 70 (roughly $42,000 a year) and enroll in Medicare at 65. No Roth balance exists yet. Left untouched, the 401(k) compounds toward the first Required Minimum Distribution at age 73.

The baseline path quietly builds a Medicare problem

Assume the 401(k) earns 6% annually and grows to approximately $4.7 million by age 73. The first RMD, calculated against the IRS Uniform Lifetime Table, comes in at roughly $177,400. Add 85% of Social Security (about $35,700) and Modified Adjusted Gross Income lands near $213,000.

That MAGI parks the retiree in IRMAA Tier 3 or Tier 4, the Medicare income brackets that surcharge Part B and Part D premiums. Combined Part B and Part D IRMAA at that level runs $4,200 to $5,300 per year. Across ages 73 to 85, that is $50,000 to $65,000 in cumulative surcharges, paid on top of regular Medicare premiums and ordinary income tax on every RMD dollar. The IRMAA calculation uses a two-year lookback, so income earned at 71 sets the premium at 73.

Inflation makes this worse. Core PCE has climbed from 125.79 in May 2025 to 129.28 in March 2026, and CPI has risen from 320.8 in April 2025 to 333.0 in April 2026. Medicare premiums track that pressure, and IRMAA thresholds adjust on a lag.

The five-year conversion window

The fix is to drain the 401(k) deliberately during the years when IRMAA does not yet apply. Before 65, Medicare is not in the picture, so income can be lifted without triggering a premium surcharge two years later.

The plan: convert $200,000 per year for five years, ages 60 through 64, moving $1.0 million from the 401(k) to a Roth IRA. That amount fills the single-filer 24% bracket, which tops out near $197,300. Federal tax on the full conversion runs about $210,000. Pay that bill from the $400,000 brokerage account rather than withholding from the conversion itself. Every dollar withheld is a dollar that never compounds tax-free.

With $1.0 million removed early, the remaining 401(k) grows to roughly $2.7 million by age 73, producing a first RMD near $102,000. Combined with taxable Social Security, MAGI lands around $138,000, inside IRMAA Tier 2. Surcharges drop to roughly $2,400 per year, or about $29,000 cumulatively across 12 years. The IRMAA savings alone clear $30,000, and the ordinary income tax saved on smaller RMDs sits on top of that.

The traps inside the strategy

Two timing rules govern execution. First, avoid heavy conversions in the year of Medicare enrollment and the two prior years, because the lookback will catch them. A $200,000 conversion at 63 sets the IRMAA premium at 65. The $200,000 conversion at 64 sets it at 66. Budget for that surcharge or shift the conversion earlier.

Second, the federal funds rate sits at 3.75% as of May 12, 2026, after 75 basis points of cuts since September 2025. Money market yields on the brokerage cash earmarked for taxes are coming down, which lowers the opportunity cost of writing a $210,000 check to the IRS over five years.

Three moves to make before year-end

1. Run the bracket-fill calculation for 2026. The 24% single bracket ceiling is the natural conversion target. Convert up to that line and stop. Crossing into 32% gives back most of the IRMAA savings.
2. Segregate brokerage cash for conversion taxes. Earmark roughly $42,000 a year from the $400,000 account. Withholding from the conversion itself wastes Roth shelf space and shrinks the long-term tax-free balance.
3. Map every conversion year against the two-year IRMAA lookback. The conversion at 63 hits the Medicare premium at 65; the conversion at 64 hits it at 66. If a one-year Tier 1 surcharge is unavoidable, accept it as the price of clearing the runway, or pull conversions forward into ages 60 and 61.

The conversion window closes on the 65th birthday. Every year inside it is worth several thousand dollars in future Medicare premiums and tens of thousands in lifetime tax. The retiree who treats ages 60 to 64 as a tax planning sprint, rather than a coasting period before Social Security, ends retirement with a smaller IRS partner and a smaller CMS bill.