Retiring at 60 With $2.2 Million in Your 401(k)? Make Sure You Convert Before Medicare

A couple in their early 60s retires with $2.2 million in a traditional 401(k), turns off the paychecks, and assumes the hard work is done. It isn’t. The five-year stretch between retirement and Medicare enrollment is the most valuable tax window most retirees will ever see, and the meter on that window is already running. A recent thread on r/retirement put the question bluntly: convert aggressively now, or let the IRS and Medicare write the plan for you later.

The two-year shadow Medicare casts on your 60s

Medicare’s income-related monthly adjustment amount (IRMAA) uses a two-year lookback. Premiums at age 65 are set off the tax return filed at age 63. That single rule reshapes the conversion calendar. For a couple retiring at 60, the truly “clean” conversion years run from 60 through 62. Anything converted at 63 or later shows up on a Medicare bill within 24 months.

The 2026 joint-filer tiers tell you why this matters. A modified adjusted gross income (MAGI) under $218,000 means no surcharge and the base Part B premium of $202.90. Cross into the $274,000 to $342,000 band and each spouse pays $202.90 in extra Part B plus $37.50 in Part D every month. That is roughly $5,770 a year for the household. Five years in that tier is just under $29,000 in surcharges that buy you nothing extra. The next tier up, $342,000 to $410,000, runs about $9,240 a year per couple.

Why doing nothing is the expensive choice

Left alone, a $2.2 million balance compounding at 6% grows to roughly $3.5 million by age 73, when required minimum distributions begin. The first RMD lands near $132,000. Add two Social Security checks of roughly $45,000 each and a sliver of dividends, and MAGI clears $218,000 before the first cup of coffee. By the late 70s, RMDs alone push the couple into the third or fourth IRMAA tier, where Part B surcharges hit $324.60 or $446.30 per spouse, per month.

Layer in Social Security taxation (up to 85% of benefits become ordinary income once provisional income clears $44,000 jointly) and the effective marginal rate on the next dollar of RMD frequently lands near 40%, even though the headline bracket says 24%.

Filling the 24% bracket on purpose

The 2026 joint brackets give this couple a wide runway before Medicare and Social Security start. After the $32,200 standard deduction, the 24% bracket runs up to $211,400 of taxable income. Converting roughly $200,000 a year from age 60 through 62 moves about $600,000 into a Roth at a blended federal cost near 18%. That is roughly $108,000 in tax, paid voluntarily, in exchange for eliminating the future RMD on that slice entirely.

The gap-year math improves further because the Fed funds rate sits at 3.75% and the 10-year Treasury yields about 4.5%, so the cash earmarked for conversion taxes can be parked in short Treasuries without giving up much yield while the plan executes.

What to do before the window closes

Three specific moves carry the entire decision:

1. Map the conversion ladder against the IRMAA calendar. Stack the largest conversions in the calendar years you turn 60, 61, and 62. Anything moved in the year you turn 63 will reset Medicare premiums two years later, so size that year’s conversion to the second IRMAA tier at $274,000 at most, and only if the bracket math still works.
2. Pay the conversion tax from a taxable account, not the 401(k). Withholding from the conversion itself shrinks the Roth and, before 59½, triggers a penalty. A brokerage account or money market holding 12 to 18 months of projected tax is the cleanest funding source.
3. Pair the strategy with a Social Security delay to 70. Holding off benefits keeps provisional income low during the conversion years and grows the eventual check by 8% per year of delay, which reduces the RMD-plus-benefit MAGI stack that drives IRMAA in the first place.

The five-year window is the only stretch where a high-balance retiree controls both sides of the equation: the income that lands on the return and the premium that arrives two years later. Skip it, and Medicare quietly bills you for the decision every month for the rest of retirement.

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