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 the couple can report up to roughly $243,600 in gross income before any dollar is taxed at 24%.

Consider the scenario above. One spouse earns $150,000. After the standard deduction, taxable income lands near $117,800, leaving roughly $93,600 of room before the 22% bracket tops out. That gap is the annual conversion capacity. Converting $50,000 per year clears the $500,000 Roth target in a decade while keeping 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. When that bill is paid from a taxable account rather than withheld from the conversion itself, every dollar of the $50,000 arrives inside the Roth and compounds tax-free from day one. Ten annual conversions of $50,000, combined with ongoing investment growth across both accounts, is precisely how a $1.2 million traditional 401(k) can end up with roughly $500,000 sitting on the Roth side before required distributions begin.

The IRMAA Trap That Ruins the Math

A Roth conversion is ordinary income, and that classification carries two distinct consequences worth understanding in sequence. First, once either spouse enrolls in Medicare at 65, the modified adjusted gross income reported two years earlier determines Part B and Part D surcharges. A conversion at 63 shows up on the 65-year-old’s premium bill. Cross the first IRMAA tier in 2026 and the combined surcharge runs roughly $96 per month per person (about $1,148 annually): the Part B add-on is $81.20 and Part D contributes another $14.50. Climb to the highest tiers and the combined monthly surcharge can reach $578 per person, since the top-tier Part B surcharge alone is $487.00 and Part D adds $91.00.

Second, once Social Security begins, up to 85% of the benefit becomes taxable when combined income clears the upper threshold. Stack a conversion on top of a Social Security check and the effective marginal rate on each 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 begin. Ages 58 through 63 are the sweet spot: wages absorb the standard deduction, the IRMAA lookback has not yet been triggered, 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. That extends the pre-RMD conversion window by two additional years beyond what older cohorts received, making the strategy more valuable for this generation than the original 73-year-old RMD age implied.

Three Moves Before Year-End

The 10-year Treasury yield is currently near 5%, a useful benchmark for sizing up this strategy. Paying 22% now to shelter decades of compounding tax-free growth easily beats holding pre-tax money that will face the same statutory rate or higher when RMDs force withdrawals 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 instead.
3. Map the two-year IRMAA lookback before age 63. The 2026 first tier for joint filers starts 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. When the tax planning complexity alone justifies bringing in a professional, it is here.

Editor’s note: This article updates the 10-year Treasury yield reference from “above 5%” to “near 5%,” reflecting the current rate of approximately 4.9% as of early November 2026, and corrects the top-tier IRMAA combined monthly surcharge from “can exceed $578” to “can reach $578” per person, consistent with the verified 2026 figures of $487.00 (Part B) plus $91.00 (Part D).

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