Converting a $1 Million 401(k) in a Single Year Costs Roughly $330,000 in Federal Tax. Spreading It Over Eight Years Can Save Six Figures, and Medicare Charges Extra Either Way

Convert a $1 million traditional 401(k) to a Roth in a single tax year and a married couple filing jointly hands roughly $330,000 to the IRS on that one return. Slice the same conversion into eight annual pieces and the total federal bill can drop by well into six figures. Both paths still hit Medicare, just on a delay.

This is the retirement decision where paperwork pace, not portfolio picks, moves the biggest dollars.

Why One Year Costs $330,000

A Roth conversion is treated as ordinary income the year you do it. Stack an extra million on top of a retiree’s Social Security and modest IRA draws and that income climbs the 2026 married-filing-jointly ladder in a hurry.

The 2026 brackets released by the IRS for joint filers run 10% up to $24,800, 12% to $100,800, 22% to $211,400, 24% to $403,550, 32% to $512,450, 35% to $768,700, and 37% above that. The standard deduction is $32,200.

A $1 million conversion blows straight through the 22%, 24%, and 32% floors and parks a large slab of income inside the 35% bracket. That is where the roughly $330,000 federal bill comes from. Only the dollars above each threshold pay the higher rate, but with a million-dollar stack the top layers are what dominate the check.

Eight Slices, Eight Lower Brackets

Now break the same $1 million into eight annual conversions of about $125,000. For a couple whose other taxable income is modest, each slice mostly fills the 12% and 22% brackets, with maybe a sliver reaching 24%.

You never touch 32%, 35%, or 37%. The same dollars come out of the traditional 401(k), the same dollars land in the Roth, but the effective federal rate on the conversion drops sharply. That is the six-figure savings the headline promises, and it is entirely a function of bracket stacking, not a loophole.

There is an opportunity-cost angle too. Tax dollars you defer can sit invested. The 10-year Treasury yield closed at 5.00% on September 15, 2026, near its one-year high. Even a conservative benchmark makes retained tax cash worth something while it waits its turn.

Medicare’s Two-Year Lookback Finds You Anyway

Here is the trap both paths share. Medicare’s income-related monthly adjustment amount (IRMAA) reprices Part B and Part D based on modified adjusted gross income from two years earlier. A conversion done in 2026 shows up on 2028 Medicare premiums.

For 2026, joint filers with MAGI at or below $218,000 pay the standard Part B premium of $202.90. Cross into the top tier, MAGI of $750,000 or more, and the total Part B premium jumps to $689.90 per month per spouse, with an added $91.00 Part D surcharge on top.

A single-year million-dollar conversion drops the couple into that top tier for one Medicare year. The eight-year plan clears the standard-premium threshold too, since each $125,000 slice added to other retirement income likely lands somewhere in the middle IRMAA tiers, but for eight consecutive Medicare years rather than one.

IRMAA is a cliff, not a slope. One dollar over a tier reprices the entire year. Model the tier your conversion lands in before you sign the paperwork.

Choosing a Pace That Fits Your Situation

There is no universal answer. A framework helps:

• Runway to RMDs. The years between retirement and age 73 or 75 are the natural conversion window. More runway means smaller annual slices.
• Bracket ceiling. Pick the top bracket you refuse to cross, usually 22% or 24% for joint filers, and size each conversion to fill it without spilling over.
• IRMAA tier you can tolerate. Decide which surcharge tier is acceptable and stay a comfortable margin below its MAGI ceiling.
• Where the tax gets paid from. Paying conversion tax from the IRA itself shrinks the Roth’s future compounding. Outside cash is better.
• Surviving spouse math. The widow’s penalty pushes the survivor into single brackets. Front-loading conversions while both spouses are alive often wins.

One Number Worth Running With a Pro

Between the bracket ladder, the IRMAA cliffs, Social Security taxation, and the eventual RMD divisor, a multi-year conversion plan has too many moving parts for a back-of-envelope answer. The quiet years between a last paycheck and the first required withdrawal are usually where this math pays off best (we sized up that window in a free Roth conversion guide). This is the kind of math worth running with a fiduciary advisor or CPA who will model the full lifetime bill, not just this year’s return.

This article is for informational purposes only and is not tax, legal, or investment advice. Consult a qualified tax professional about your specific situation.

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