The 10-Year Plan That Turns a $1.2 Million 401(k) Into a $500,000 Roth Without Leaving the 22% Bracket
Most couples in their late 50s with a million-dollar 401(k) assume big Roth conversions mean big tax bills, but a mechanical bracket-fill strategy quietly sidesteps that assumption by exploiting a window that closes the moment Medicare begins.
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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 comes 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 age 68 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. The distance from there to the top of the 22% bracket is roughly $93,000. That 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 good 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 by age 68, well before RMDs begin at 73.
IRMAA Trap That Ruins the Math
The conversion itself is ordinary income. That matters twice. 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 and the surcharge runs roughly $70 per month per person; cross the higher tiers and it climbs past $400.
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 no Social Security to push 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.
Three Moves Before Year-End
The 10-year Treasury near 5% is a useful sanity check: 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.
- 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.
- Fund the tax bill from outside the 401(k). Withholding from the conversion shrinks the Roth and, if either spouse is under 59Β½, triggers a 10% penalty on the withheld amount. Use taxable savings.
- Map the two-year IRMAA lookback before age 63. The 2026 first tier for joint filers sits near $212,000 of MAGI. If a conversion pushes you over it 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.
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
His work has been featured on platforms like MSN, Yahoo Finance, USA Today, and more. He's written about credit cards, social security, ETFs, savings accounts, and just about anything else you can imagine when thinking about money. Jake love to cook, play golf, and tell people he's never had a cavity. (It's true!)
