Still Earning at 69 With a $300,000 IRA? Why Funding a Traditional Account Now Can Backfire at 73

Picture a household where one spouse, age 69, is still earning roughly $80,000 a year and plans to work another year or two before claiming Social Security. The other spouse, age 67, already started benefits. Together they have about $300,000 in traditional IRAs, a balance dented by past layoffs but finally feeling substantial again. Tax season arrives with a critical question: should that working spouse keep maxing the traditional IRA for the deduction, or pivot new dollars into a Roth?

A recent retirement forum thread captured this exact tension. The original poster wanted to ask a fiduciary intelligent questions, not just nod along. That instinct is right, because the choice made in these final earning years quietly sets the tax bill at 73.

Why the deduction today costs more at 73

Every dollar in a traditional IRA gets a deduction now and becomes ordinary income later, including required minimum distributions (RMDs) that kick in at age 73 for anyone born between 1951 and 1959, or 75 for those born in 1960 or later. Miss one and the penalty is 25% of the amount you should have withdrawn.

Here is what most people miss. Social Security uses combined income, which is adjusted gross income (AGI) plus any tax-free interest plus half of the benefits. Below $32,000 for a married couple filing jointly, none of the benefit is taxed. Between $32,000 and $44,000, up to half can be taxed. Above $44,000, up to 85% of the benefit becomes taxable. Those thresholds have not moved since 1984, so almost any household with a meaningful IRA will eventually cross them.

A $300,000 balance produces a modest first-year RMD. The risk is what that balance looks like after another decade of growth plus continued traditional contributions. By the time both spouses are on Social Security and RMDs have started, forced withdrawals can shove combined income well past the 85% tier and keep it there for life.

Roth contributions flip the math. Dollars go in after tax, qualified withdrawals come out tax-free, and a Roth IRA has no RMDs during the original owner’s lifetime. Those withdrawals also stay out of the combined income formula, which is the whole point.

One catch: you can only fund an IRA if someone in the household has earned income. Once the 69-year-old scales back, the contribution window closes and only conversions remain.

The Medicare surcharge hiding behind the IRA

Traditional withdrawals also feed into the income figure Medicare uses to set the Income-Related Monthly Adjustment Amount (IRMAA), the surcharge on Part B and Part D premiums. Medicare looks at the tax return from two years earlier. In 2026, a joint filer pays no surcharge with modified adjusted gross income (MAGI) at or below $218,000, but crossing that line bumps the Part B premium from $202.90 to $284.10 per person per month, with a Part D surcharge layered on top. It is a true cliff. A single extra dollar of RMD can cost a couple thousands across both spouses for the year.

Run the comparison with your own numbers and the picture gets concrete fast. Even when current and future tax rates look similar, the Roth’s freedom from RMDs and from the Social Security and IRMAA formulas usually wins on flexibility.

What to do with the last earning years

The window for making these moves is shorter than it looks. Here is where to focus:

1. Lean new contributions toward the Roth. At a $300,000 traditional balance, the deduction’s edge is small and the long-term tax drag from RMDs is the bigger lever. Ask the adviser to model both paths rather than assume the deduction always wins.
2. Use the low-income gap as a bridge. After the working spouse stops earning but before the second Social Security check and before RMDs begin, there is usually a short window of unusually low taxable income. Modest Roth conversions during that window can shrink the future RMD without spiking combined income today.
3. Delay the second claim if cash flow allows. Waiting until 70 raises the benefit by roughly 8% for each year past full retirement age and keeps taxable income low enough to make conversions cheaper. Once both checks are on, that flexibility is gone.
4. Remember the qualified charitable distribution. Starting at age 70½, gifts sent directly from an IRA to a charity can satisfy part or all of an RMD without raising AGI, which protects both the Social Security taxation tiers and the IRMAA brackets.

The hardest mistake to undo is letting the traditional balance balloon unchecked, then watching RMDs drag 85% of the Social Security benefit into the taxable column for the rest of retirement. A fiduciary running the actual projection is worth the time. The goal in these last working years is simple: keep tomorrow’s required income as small and as flexible as possible.