A recent thread on r/retirement laid out a familiar picture: a newly retired 65-year-old with roughly $1.7 million in a traditional 401(k) asking what to actually do first. The account balance takes care of itself. The eight-year window between retirement and required minimum distributions at 73 is where the outcome gets decided.
Those eight years are the most valuable tax planning window most retirees will ever get, and readers in the $500,000 to $2.5 million range routinely walk past it without recognizing what it is worth.
Why the Gap Years Matter More Than the Balance
Left untouched, a $1.7 million traditional 401(k) growing at 6% a year reaches roughly $2.7 million by age 73. Divide that by the IRS Uniform Lifetime Table factor of 26.5 and the first RMD lands near $102,000. That figure hits your tax return whether you need the cash or not.
Stack it on top of Social Security. Delayed benefits climb about 8% per year from full retirement age up to 70, so a household that waits often lands in the $50,000 to $60,000 range of annual benefits. Add the projected RMD and you are looking at roughly $160,000 of taxable income before you make a single portfolio decision.
The IRMAA Trap Sitting Two Years Behind You
Medicare premiums use a two-year income lookback. In 2026, once modified adjusted gross income clears $109,000 for a single filer or $218,000 for a couple, IRMAA adds $1,148 per person to annual Medicare costs. The next tier at $137,000 single or $274,000 joint jumps the surcharge to $2,886 per person. Combine that with taxation of Social Security and federal bracket creep, and the effective marginal rate on the next dollar of income can climb sharply.
The standard 2026 Part B premium is already about $203 a month. IRMAA layers on top of that. A couple that trips into the second tier pays an extra $5,772 a year for the same Medicare coverage the neighbors get for the base rate.
What the Gap Years Are Actually For
Between 65 and 73, taxable income can be whatever you decide to make it. No wages coming in. Social Security not yet claimed if you delay. RMDs still years away. The 12% and 22% federal brackets sit largely empty, waiting to be filled with Roth conversions at rates you may not see again.
Convert $80,000 to $100,000 a year over those eight years, and $700,000 or more of tax-deferred money moves permanently out of the future RMD calculation. The 401(k) that would have forced out $100,000+ at 73 generates a much smaller distribution, keeping you under the first IRMAA threshold and out of the Social Security taxation phase-in.
The bond math supports the timing. The 10-year Treasury yields 4.6%, sitting in the 96.8th percentile of the past year, while the FDIC national average on 12-month CDs is only 1.65%. Money you would otherwise leave in the traditional account to compound at those yields also compounds the future tax bill. Moving it to a Roth grows the same dollars tax-free instead of stacking future IRMAA triggers.
Three Moves to Make in the Next 90 Days
- Project your first RMD by dividing your expected age-73 balance by 26.5. If the answer clears $80,000, you have a tax problem rather than an income problem, and Roth conversions are the fix.
- Fill the 22% or 24% federal bracket with conversions each year through age 72, stopping short of the first IRMAA threshold. Keep modified adjusted gross income under $218,000 joint or $109,000 single in any year that will show up in the two-year Medicare lookback.
- At 70.5, start using qualified charitable distributions. The 2026 QCD limit is $111,000 per person, and every dollar sent directly from the IRA to charity counts toward the RMD while staying off the tax return entirely.
The Fed funds rate has held at 3.75% for more than half a year, and Core PCE inflation sits at the 90.9th percentile of the past year. High yields on fixed income and steady inflation both raise the real cost of a deferred tax bill. Waiting to plan the withdrawal side of a $1.7 million portfolio is the one decision that keeps getting more expensive.
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