The 10-Year Plan That Turns a $1.2 Million 401(k) Into a $500,000 Roth Without Leaving the 22% Bracket

A MarketWatch reader in their 60s recently asked whether it was too late to start Roth conversions on a $1 million 403(b) balance while earning $345,000. The better version of that question surfaces about a decade earlier: a couple, both 58, sitting on $1.2 million in a traditional 401(k), one spouse still working and earning roughly $150,000, wondering how to shrink the future tax bomb before required minimum distributions arrive.

The answer that keeps them out of the 24% bracket, off the IRMAA cliff, and still moves roughly $500,000 into a Roth by the time distributions must begin is straightforward: a bracket-fill conversion, run mechanically every year for ten years.

Filling the 22% Bracket Without Spilling Into 24%

For a married couple filing jointly in 2026, the 22% bracket runs from $100,800 up to $211,400 in taxable income, and the standard deduction is $32,200. That means a couple can report roughly $243,600 in gross income before the next dollar is taxed at 24%.

Take the couple above. One spouse earns $150,000. After the standard deduction, taxable income sits near $117,800, leaving roughly $93,600 of distance to the top of the 22% bracket. That gap is the annual conversion capacity. To land at $500,000 of Roth principal over ten years, they only need to convert about $50,000 per year, which leaves plenty of headroom for a raise, a bonus, or a strong year in a taxable brokerage account.

The federal tax cost on a $50,000 conversion at 22% is $11,000. Paid from a taxable account rather than withheld from the conversion itself, every dollar of the $50,000 lands inside the Roth and begins compounding tax-free. Ten conversions of $50,000, plus growth on balances that stay invested through the decade, is how a $1.2 million traditional 401(k) ends up with roughly $500,000 sitting on the Roth side before required distributions begin.

The IRMAA Trap That Ruins the Math

The conversion itself is ordinary income, and that matters in two distinct ways. First, once either spouse enrolls in Medicare at 65, the modified adjusted gross income from two years earlier drives the Part B and Part D surcharges. A conversion at 63 shows up on the 65-year-old’s premium. Cross the first IRMAA tier in 2026 and the combined surcharge runs roughly $96 per month per person (about $1,148 annually), since the Part B add-on alone is $81.20 and Part D contributes another $14.50. Climb to the higher tiers and the combined monthly surcharge can exceed $578 per person.

Second, once Social Security starts, up to 85% of the benefit becomes taxable when combined income clears the upper threshold. Stack a conversion on top of a benefit check and the effective marginal rate on the converted dollar can climb toward 40%, even though the statutory bracket still reads 22%.

The way to keep the plan clean is to front-load conversions in the years before Medicare and before Social Security. Ages 58 through 63 are the sweet spot: wages absorb the standard deduction, there is no IRMAA lookback yet, and Social Security has not started pushing income into taxation (we sized up this low-tax window between the last paycheck and the first RMD in a free Roth conversion guide). Once 65 arrives, taper the conversions to stay under the first IRMAA tier.

One important wrinkle for couples in this age range: under the SECURE 2.0 Act, anyone born in 1960 or later must begin required minimum distributions at 75 rather than 73. A 58-year-old in 2026 was born in 1967 or 1968, so the RMD clock does not start until age 75, extending the pre-RMD conversion window by two additional years beyond what older cohorts received.

Three Moves Before Year-End

The 10-year Treasury yield now sits above 5%, a useful sanity check for this strategy: paying 22% now to shelter decades of compounding easily beats holding pre-tax money that will be taxed at the same rate or higher later.

1. Pull last year’s Form 1040 and calculate this year’s bracket headroom. Subtract projected taxable income from $211,400. That number is the maximum conversion that keeps you in the 22% bracket for 2026, and it is rarely a round $50,000.
2. Fund the tax bill from outside the 401(k). Withholding from the conversion shrinks the Roth and, if either spouse is under 59½, triggers a 10% penalty on the withheld amount. Use taxable savings.
3. Map the two-year IRMAA lookback before age 63. The 2026 first tier for joint filers sits at $218,000 of MAGI. If a conversion pushes you over that line in the year you turn 63, the surcharge lands the year you turn 65. If the tax planning alone justifies a fee-only advisor, it is here.

Editor’s note: This article corrects the 2026 IRMAA first-tier threshold for married joint filers from approximately $212,000 to $218,000, updates the Tier 1 monthly surcharge from roughly $70 to $96 per person (reflecting the actual combined Part B and Part D figures), notes that the higher tiers can now exceed $578 per month per person, updates the 10-year Treasury yield to above 5%, and adds a clarification that couples born in 1960 or later face an RMD starting age of 75 rather than 73 under the SECURE 2.0 Act.

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