Retiring at 62 With $900,000 in a 401(k)? You Have One Tax Year Left to Convert Before Medicare Starts Reading Your Return.
The Medicare lookback rule turns one calendar year into a permanent cost, and a 62-year-old with $900,000 in a traditional 401(k) is sitting right at the edge of it.
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A 62-year-old sitting on $900,000 in a traditional 401(k) has three years until Medicare enrollment and one tax year left before the returns she files start setting her premiums. Medicare uses a two-year lookback. Social Security generally prices a year’s premium off the return from two years earlier, using the most recent return available, though it can reach back further when it has to.
Her 2026 income would ordinarily price 2028 coverage, a year before she enrolls. Her 2027 return prices 2029, her first Medicare year. So a Roth conversion executed this calendar year ordinarily will not affect her Medicare premium. The same conversion a year later, on the other hand, will.
Who Actually Needs to Care
For most retirees this is academic. Income-Related Monthly Adjustment Amount (IRMAA) affects roughly 8% of people with Medicare Part B. A single filer with modified adjusted gross income (MAGI) at or below $109,000 pays the standard $202.90 premium with zero surcharge. A joint filer is clear at or below $218,000. Anyone well under those lines in 2026 can stop here.
Cross them and it sharpens. Under the 2026 CMS schedule, joint MAGI above $218,000 through $274,000 carries an $81.20 per-person Part B surcharge plus $14.50 per person for Part D. Above $274,000 through $342,000, the Part B surcharge is $202.90 per person and Part D is $37.50. Above $342,000 through $410,000, Part B is $324.60.
For IRMAA, MAGI is adjusted gross income (AGI) from Form 1040 line 11 plus tax-exempt interest from line 2a. Municipal bond income that feels tax-free still counts. So does the taxable portion of a Roth conversion, capital gains in a taxable brokerage account, a severance check, and home-sale profit above the exclusion.
The Window That Closes in December
A 62-year-old with $900,000 pretax has an unusual setup: no wages, no Social Security yet, and no required minimum distributions (RMDs) for years. Under the SECURE 2.0 Act, someone born in 1960 or later begins RMDs at 75, not 73.
For a married couple filing jointly in 2026, the 24% bracket begins at $211,400 of taxable income and runs through $403,550, with the $32,200 standard deduction applied separately. Converting into that bracket this year costs 24% or less federally and, on the lookback rule, ordinarily leaves Medicare untouched.
Compare the same move a year later. Take a couple whose other income already runs near $210,000, from a spouse’s earnings, a pension, or taxable investments. A $100,000 conversion on top brings joint MAGI to roughly $310,000. Using 2026 figures as an illustration, that lands them in the $274,000 to $342,000 band: about $4,869.60 in annual Part B surcharges for the household, plus roughly $900 in Part D, for a combined $5,769.60. Those are today’s numbers, not a forecast. CMS has not published 2029 thresholds or premiums, so the actual cost of a 2027 conversion is unclear. What’s knowable is the direction.
Two Traps Before Signing
SSA-44 does not fix a voluntary conversion. The form recalculates IRMAA only after a qualifying life-changing event, including work stoppage, marriage, divorce, death of a spouse, and loss of pension. A conversion she chose to make will not qualify regardless of how much it raised her MAGI. The survivor bracket is the second. Joint filers get an IRMAA-free zone up to $218,000. Single filers get $109,000. When one spouse dies, the survivor files single on roughly the same household income and can jump one or two tiers with no change in cash flow at all.
What to Do Before Year-End
The calendar does the deciding here, so the sequence matters more than the size.
- Confirm how the conversion can actually be executed. A retired participant may need to roll the 401(k) into a traditional IRA first, unless the plan permits an in-plan Roth conversion. That step takes time.
- Model a 2026 conversion against the correct bracket ceiling. Sizing to the 24% bracket means working to $403,550 of taxable income, not $211,400. Execute before December 31. A completed conversion cannot be recharacterized.
- Add tax-exempt interest to projected AGI before setting the amount. Munis count for IRMAA, and the 2027 return will be read.
- Get a second opinion if 2027 or 2028 MAGI lands near a bracket edge. A fee-only advisor in retirement tax sequencing can weigh the conversion against Medicare, Social Security taxation and the survivor bracket together.
The 2026 return is the last one that stays out of the calculation. Everything after it is evidence.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
