Consider a married couple, both 66, sitting on $1.5 million in a traditional 401(k). They retired last year, delayed Social Security to 70 to lock in the roughly 8% annual delayed retirement credit, and are living on cash reserves plus roughly $15,000 in taxable dividends. Their return this year will show almost nothing above the standard deduction. That is the opening, and it closes fast.
A listener named Zoe recently described almost this exact situation on the Clark Howard podcast, telling advisor Wes Moss she planned to “keep it under 24% and the 24% tax bracket and convert $90,000, withdraw an additional 30k to pay the taxes”. Her instinct on the number was right. Her instinct on the bracket was expensive.
Why $90,000 Fits Inside the 12% Bracket
For 2026, the IRS set the 12% bracket ceiling for married couples filing jointly at $100,800 in taxable income. Every dollar above that is taxed at 22%. The standard deduction is $32,200, and each spouse aged 65 or older gets an additional senior deduction of up to $6,000 per person through 2028. Before the first dollar of income hits the return, this couple has $44,200 shielded.
Add $15,000 of dividends and convert $90,000 from the traditional 401(k) to a Roth. Gross income lands at $105,000. Subtract the $44,200 in deductions and taxable income comes to $60,800. The federal bill runs 10% on the first $24,800 and 12% on the next $36,000, roughly $7,500 in total. The blended rate on the converted $90,000 works out to about 8%, well below the 22% or 24% Zoe was willing to pay.
Push the conversion to $100,000 and dividend income nudges taxable income past the 12% ceiling. Each extra dollar jumps to 22%, nearly tripling the marginal cost. That is why $90,000 is the number, and why $91,000 usually is not.
What Happens if They Skip the Window
Under SECURE 2.0, required minimum distributions begin at 75 for anyone born in 1960 or later. This couple has almost a decade of RMD-free years. Left alone, $1.5 million compounding at 5% grows past $2.3 million by age 75. The first RMD at the IRS Uniform Lifetime factor pulls out a mandatory withdrawal in the mid-five-figures whether they need it or not.
Stack that against Social Security at 70. A couple with strong earnings histories can easily draw a combined $80,000 to $90,000 in benefits, and the 2026 COLA of 3% only compounds the number annually. Provisional income calculations push 85% of that benefit into taxable income. RMDs plus taxed Social Security plus dividends puts them squarely in the 22% bracket, with the top slice bleeding into 24% and triggering IRMAA surcharges on Medicare Part B and Part D.
Converting $90,000 a year for nine years moves $810,000 into the Roth. That balance grows tax-free and never triggers an RMD. The remaining traditional balance is smaller when RMDs begin, and the first mandatory withdrawal drops closer to $60,000, low enough to keep the couple inside the 12% bracket even after Social Security starts.
What This Couple Should Actually Do
- Run the conversion in December, not January. Waiting until year-end lets you see actual dividend, interest, and capital gain income before dialing the conversion amount. If dividends came in at $18,000 instead of $15,000, drop the conversion to $87,000 to stay under the $100,800 ceiling.
- Pay the tax from outside the 401(k). Withholding tax from the conversion itself shrinks the amount that lands in the Roth. Use taxable brokerage cash or a rolling reserve so all $90,000 makes it across.
- Watch the two-year IRMAA lookback. Medicare bases 2028 Part B and Part D premiums on your 2026 return. A $90,000 conversion sits well below the first IRMAA tier for married couples, but combining it with a large realized capital gain or a pension lump sum can trip the surcharge and cost each spouse an extra $75 or more per month for a full year.
The 12% bracket is a policy artifact of the current code. It widens modestly with inflation, but with the 10-year Treasury near 5% and deficits climbing, betting that future statutory rates will be lower is a poor wager. Nine years of $90,000 conversions at an 8% blended cost is the arbitrage. Skipping it means paying the same tax later at double the rate.
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