Retiring at 62 With $900,000 in a 401(k)? You Have One Tax Year Left to Convert Before Medicare Starts Reading Your Return.
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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 necessary.
Her 2026 income would ordinarily price 2028 coverage, a full year before she enrolls. Her 2027 return prices 2029, her first actual Medicare year. A Roth conversion executed this calendar year ordinarily will not touch her Medicare premium. The same conversion completed a year later will.
Who Actually Needs to Care
For most retirees, this is academic. The 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 monthly premium with zero surcharge. A joint filer stays clear at or below $218,000. Anyone comfortably under those lines in 2026 can stop reading here.
Cross those thresholds and the math tightens quickly. 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. Push further, into the $274,000 to $342,000 band, and the Part B surcharge climbs to $202.90 per person while Part D rises to $37.50. Because IRMAA applies separately to each covered spouse, the household cost compounds fast. CMS announced the 2026 figures in November 2025, and projections based on current inflation data suggest the standard joint threshold for 2028 (which will be priced off 2026 income) may land somewhere between $226,000 and $234,000, though those numbers will not be official until fall 2027.
For IRMAA purposes, 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 payment, 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, anyone born in 1960 or later begins RMDs at 75, not 73. That gives a retiree in this cohort a long low-income runway before mandatory withdrawals start pulling the tax bracket upward.
On the rate side, the One Big Beautiful Bill Act, signed into law on July 4, 2025, made the seven-bracket structure from the Tax Cuts and Jobs Act permanent. The scheduled 2026 reversion to higher pre-2018 rates never happened. The 24% bracket is now permanent law rather than a temporary provision. That change removed the rate-sunset urgency that dominated Roth conversion discussions for the past several years, but it did nothing to defuse the Medicare timing urgency.
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 inside that bracket this year costs 24% or less federally and, on the lookback rule, ordinarily leaves Medicare untouched.
The same move a year later carries a meaningfully different risk. Consider 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 $4,870 in annual Part B surcharges for the household, plus roughly $900 in Part D, for a combined $5,770. Those are today’s numbers, not a forecast. CMS has not published 2029 thresholds or premiums, so the actual cost of a 2027 conversion remains uncertain. The direction is not.
Two Traps Before Signing
SSA-44 does not fix a voluntary conversion. The form recalculates IRMAA only after a qualifying life-changing event, which includes work stoppage, marriage, divorce, death of a spouse, and loss of pension income. A conversion the retiree chose to execute will not qualify, regardless of how sharply it raised MAGI.
The survivor bracket is the second trap, and it is easy to miss in the planning phase. Joint filers get an IRMAA-free zone up to $218,000; single filers get only $109,000. When one spouse dies, the survivor files single on roughly the same household income and can jump one or two IRMAA tiers with no change in cash flow at all. A Roth conversion strategy sized for two people may create a painful and permanent premium spike for one.
What to Do Before Year-End
The calendar does the deciding here, so sequence matters more than size. Before executing anything, confirm how the conversion can actually be completed. A retired participant may need to roll the 401(k) into a traditional IRA first, unless the plan permits an in-plan Roth conversion, and that rollover step takes time.
Once the mechanics are clear, model the 2026 conversion against the correct bracket ceiling. Sizing to the 24% bracket means working up to $403,550 of taxable income, not stopping at $211,400, which is where the bracket begins. The conversion must be completed before December 31. A completed conversion cannot be recharacterized.
Two more details matter before setting the conversion amount. Add tax-exempt interest to projected AGI before finalizing the number, since munis count for IRMAA and the 2027 return will be read closely. If 2027 or 2028 MAGI looks like it might land near a bracket edge, a fee-only advisor focused on retirement tax sequencing can weigh the conversion against Medicare costs, Social Security taxation thresholds, and the survivor bracket together.
The 2026 return is the last one that stays outside the Medicare calculation. Everything filed after it becomes evidence.
Editor’s note: This pass added projected 2028 IRMAA threshold ranges (estimated $226,000 to $234,000 for joint filers based on 2026 income, per current inflation projections) and noted that the 2026 CMS figures were officially released in November 2025; the household IRMAA cost figures were also rounded for consistency with the underlying surcharge data.
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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.
