The Roth Conversion Strategy Affluent Couples Over 60 Are Using to Drain a $1.4 Million 401(k) Before RMDs Begin

A married couple, both 61, just walked away from W-2 income with $1.4 million in a traditional 401(k). They plan to defer Social Security until 70. That decision, combined with the fact that required minimum distributions don’t begin until 73, hands them something most retirees never get: a roughly 12-year runway where their taxable income is essentially whatever they choose to make it.

Affluent couples in this exact position are using that window to systematically move the pre-tax 401(k) into a Roth, paying tax voluntarily at today’s rates to avoid a forced withdrawal at tomorrow’s. The math has long been favorable. Two recent developments make it even cleaner: the 2026 brackets are well-indexed for inflation, and the One Big Beautiful Bill Act, signed into law on July 4, 2025, made the lower TCJA income tax rates permanent, giving multi-year conversion plans a degree of certainty they have rarely enjoyed before.

The bracket-fill math on a $1.4 million balance

Start with the 2026 numbers for a married couple filing jointly. The standard deduction is $32,200. The 22% bracket extends up to $211,400 of taxable income, the 24% bracket runs to $403,550, and the 32% cliff doesn’t arrive until taxable income clears that $403,550 threshold.

With no wages, no Social Security yet, and only modest brokerage income, this couple can convert roughly $240,000 per year and keep their taxable income near the top of the 22% bracket. Pushing to the ceiling of the 24% bracket, the annual conversion grows to somewhere in the $375,000 to $435,000 range. At the 22% pace, the entire $1.4 million empties in about six to seven years, well inside the runway, with every dollar taxed at 22% to 24% rather than the 32%-plus rates a swollen RMD could force later.

There is an additional wrinkle worth sizing before either spouse reaches 65. The OBBBA introduced a new $6,000-per-person senior bonus deduction for filers age 65 and older, available from 2025 through 2028. For a couple where both spouses qualify, the combined benefit reaches $12,000. The catch: the deduction phases out at 6% of every dollar of MAGI above $150,000 for joint filers and disappears entirely at $250,000. A large Roth conversion that pushes MAGI into that phaseout band produces an effective marginal rate noticeably above the nominal 22% bracket, so couples in their mid-60s should model their conversion amount against this phaseout before committing to an annual figure.

The central insight is unchanged: timing and rate are the only variables that matter. The tax on that pre-tax balance is unavoidable. Wes Moss made the same point on a recent Clark Howard segment, noting that retirees with pensions and large IRAs often “find yourself today in the 15% tax bracket, but in retirement you’re going to be in the 20% bracket” once Social Security and RMDs stack on top of each other.

Pay the tax from the brokerage, not the IRA

A $240,000 conversion at a 22% effective federal rate generates roughly $50,000 of tax. Pulling that $50,000 directly from the 401(k) defeats most of the strategy, because it shrinks the asset base that will compound tax-free inside the Roth. Couples executing this well fund the tax bill from a taxable brokerage account, often held in short Treasuries currently yielding roughly 4% at the six-month maturity, keeping the cash liquid when estimated payments are due.

The IRMAA trap waiting at 63

The conversion plan collides with Medicare at age 65, and the rules use a two-year lookback on income. A large conversion at 63 sets the IRMAA surcharge at 65. A large conversion at 71 sets the surcharge at 73, exactly when RMDs land on top. In 2026, the first IRMAA threshold for joint filers is $218,000 of modified adjusted gross income. Above that line, the standard Part B premium of $202.90 per month climbs with each bracket crossed, reaching as high as $689.90 per month at the top tier. The cleanest pattern is to front-load conversions in the early 60s, then taper sharply before the 63rd birthday, accepting that the final tranche may need to stretch into the 24% bracket to clear the balance in time.

Two more rules carry real weight. Each conversion starts its own five-year clock before earnings can be withdrawn penalty-free, a point Suze Orman has raised repeatedly: “the time clock on a Roth 401 does not transfer with you to a Roth IRA.” And Roth IRAs carry no RMDs during the original owner’s lifetime, which is the entire reason this exercise pays off.

Three moves to make this quarter

1. Model the 22% versus 24% fill, accounting for the senior bonus deduction. Run both scenarios against your actual 2026 income. The 22% plan stretches roughly seven years; the 24% plan compresses to four or five and may be the better fit if one spouse has a pension arriving at 65. If either of you will hit 65 before 2028, layer in the OBBBA senior deduction phaseout: conversion income above $150,000 of MAGI starts eroding that benefit at 6 cents per dollar, raising your true marginal cost.
2. Build the tax-payment bucket now. Move enough from equities into short Treasuries or a money market fund to cover two years of conversion taxes. That way, a market drawdown doesn’t force you to sell into weakness in April.
3. Stop conversions cold the year you turn 63. The two-year IRMAA lookback means income that year sets Medicare premiums at 65. If your combined income will exceed the first IRMAA threshold of $218,000, the surcharge alone justifies a fee-only CPA review before December 31.

Editor’s note: This pass corrected the 2026 bracket thresholds for married filers (the 22% bracket tops at $211,400 of taxable income and the 24% bracket tops at $403,550, not the figures that appeared in the previous version), and updated the six-month Treasury yield to approximately 4%, reflecting current market rates.

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