Here Is Why I Would Tell a 71-Year-Old With $4 Million to Spend Down the Traditional IRA First

The retiree we are modeling is single, 71, and sitting on $4 million split across a $2.5 million traditional IRA, an $800,000 Roth IRA, and a $700,000 taxable brokerage account. Required minimum distributions hit in two years, and the standard withdrawal sequence (taxable assets first, traditional IRA second, Roth IRA last) is about to become far more expensive than it appears on paper.

That conventional approach allows the traditional IRA to keep compounding until future RMDs grow large enough to push her into higher tax brackets, trigger larger Medicare IRMAA surcharges, and increase the taxation of Social Security income. The case for drawing down the traditional IRA now, rather than waiting for the IRS to force the issue later, is stronger than most retirees appreciate.

The RMD problem coming into focus at 73

Leave the traditional IRA untouched, let it compound at a modest 5% for two years, and the balance climbs to roughly $2.76 million. Divide that by the IRS Uniform Lifetime Table factor of 26.5 for age 73 and her first RMD lands at $104,151. Add $42,000 in Social Security and her AGI clears $146,000 before she makes a single discretionary financial decision.

That number is the trap. It drops her squarely into the 22% to 24% bracket and into the second IRMAA surcharge tier for single filers, the $137,000 to $171,000 income band under 2026 CMS thresholds. IRMAA surcharges Medicare Part B and Part D premiums on a rolling two-year lookback, so income decisions made today show up in premium bills two years later. The first IRMAA cliff for 2026 starts at $109,000 for single filers, and crossing it by even one dollar triggers roughly $1,148 in extra annual Medicare costs. Those surcharges never appear on a brokerage statement, which is exactly why retirees routinely miss them until the bill arrives.

Why front-loading the traditional IRA at 71 and 72 works

Her income is structurally lower right now than it is likely to be at any other point in retirement. She is no longer working, required minimum distributions have not started, and Social Security is currently her only forced income source. That creates a rare two-year window of relatively inexpensive bracket space she can fill on her own terms, rather than waiting for the IRS to fill it for her at a higher cost.

Withdrawing $80,000 annually from the traditional IRA at ages 71 and 72 largely fills the 22% bracket voluntarily while cutting future RMD pressure. The traditional balance falls by roughly $160,000 plus the future growth that money would have generated, pushing the first projected RMD at 73 down to about $98,000. The larger lever is Roth conversion. Moving $150,000 annually from the traditional IRA into the Roth at 71 and 72, converting $300,000 total, pulls the first RMD closer to $93,000. Combined with lower future IRMAA exposure, the lifetime tax savings could land in the $65,000 to $80,000 range, while shifting more long-term growth into the account with the most favorable tax treatment.

The yield backdrop matters here

The current rate environment adds urgency to this strategy. On July 29, 2026, the Fed held its benchmark rate at 3.50% to 3.75% for the fifth consecutive meeting, though the vote was not unanimous. Three regional Fed presidents (Beth Hammack, Neel Kashkari, and Lorie Logan) dissented and preferred an immediate quarter-point hike, a split that signals patience inside the committee is thinning. The June dot plot had already told a hawkish story: the median policymaker projected rates ending 2026 at 3.8%, and nine of eighteen participants saw at least one hike before year-end. Fed Chair Kevin Warsh, for his part, declined to submit his own economic projections at the June meeting.

With the 10-year Treasury yielding approximately 4.7% and the 30-year above 5.1%, the yield curve rewards patient positioning. She can fund two years of withdrawals from short Treasuries without selling equities, then redeploy converted Roth dollars into longer-duration bonds where yields are more generous. The spread between short and long maturities is wide enough to reward that sequencing. After a weaker-than-expected July jobs report, markets remained roughly split on whether the Fed will hike at the September meeting, so the window for locking in current yields may stay open longer than previously assumed.

Persistent inflation reinforces the same logic. The FOMC’s June 2026 statement cited inflation running above the 2% target, partly due to energy price shocks from the Middle East conflict, and the Fed’s June projections raised the headline PCE inflation forecast for 2026 to 3.6%, up from 2.7% projected in March. When price levels keep climbing, the real value of every dollar sitting inside a tax-deferred wrapper erodes year by year. Paying tax now in known brackets beats paying tax later on a larger nominal balance in brackets that may or may not be as favorable.

What I would tell her to do this month

1. Model both paths with after-tax cash flow projections. Run age 71 through 90 under (a) the default spend-taxable-first order and (b) a $150,000-per-year Roth conversion at 71 and 72. Compare lifetime federal tax, IRMAA surcharges, and ending Roth balance. The Roth column is what your heirs inherit tax-free.
2. Map the IRMAA tier transitions before converting. The single-filer tiers are cliffs. Crossing one by a dollar raises Medicare premiums for a full year. Size each conversion to land safely inside a tier, not on the edge. For 2026, the first cliff sits at $109,000 and the second at $137,000 for single filers, with the jump from below the first threshold to the second tier costing thousands more annually in combined Part B and Part D surcharges.
3. Layer in Qualified Charitable Distributions. She has been QCD-eligible since age 70.5. Routing up to $111,000 of future RMDs directly to a qualifying charity in 2026 satisfies the distribution requirement without adding to AGI, protecting the IRMAA tier she chose. The One Big Beautiful Bill Act, signed July 4, 2025, makes QCDs more valuable starting this year by limiting itemized charitable deductions to contributions exceeding 0.5% of AGI and capping the tax benefit for top-bracket earners at 35 cents on the dollar. A QCD bypasses both restrictions entirely because it reduces taxable income before any deduction is calculated. The same law also creates a new above-the-line cash deduction for non-itemizers: $1,000 for single filers and $2,000 for married couples filing jointly. That ceiling is far below the $111,000 QCD limit, making the QCD the far more powerful tool for retirees with large IRA balances who also have charitable intent.

The default withdrawal order is a heuristic built for average circumstances. At 71, with $2.5 million in a traditional IRA and RMDs two years away, average circumstances simply do not apply. Acting now, while the tax window is open and rates reward the sequencing, is the decision that protects the most after-tax wealth over the long run.

Editor’s note: This pass updated the 10-year Treasury yield to approximately 4.7% to reflect August 2026 market data, revised the 30-year yield reference to above 5.1%, added Fed Chair Kevin Warsh’s decision not to submit individual economic projections at the June 2026 meeting, and confirmed the 2026 QCD limit of $111,000 and the OBBBA’s $1,000/$2,000 non-itemizer charitable deduction caps against current primary sources.

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