A 63-Year-Old Couple Is Converting $500,000 to a Roth Over Four Years to Erase a $140,000 Tax Bill
Two retirees with $1.4 million in traditional 401(k)s discovered a narrow tax window that closes the moment Social Security starts and Medicare kicks in, and they are racing to use it before the IRS forces their hand.
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A couple both aged 63, with roughly $1.4 million between two traditional 401(k)s, ran the numbers on their own retirement and did not like what they saw. Left alone, that balance compounds into the mid-$2 million range by the time required minimum distributions begin, dragging every dollar of future Social Security into taxation and stacking Medicare surcharges on top. Their fix: convert $125,000 per year for four straight years, drain the pre-tax account down to a manageable stub, and eliminate what a Bogleheads-style projection pegged at roughly $140,000 in lifetime federal tax.
The window they are exploiting is narrow and specific. Both spouses are retired, neither has claimed Social Security, and Medicare enrollment is still two years out. That means their only taxable income is what they choose to generate through conversions. For a 63-year-old couple, this is the cleanest bracket-management setup the tax code offers, and it closes fast.
Why the Four-Year Runway Matters
Filing jointly in 2026, the couple gets a standard deduction of $32,200. Layer a $125,000 Roth conversion on top of that and taxable income lands around $92,800, entirely inside the 12% and 22% brackets under the $206,700 top of the 22% band for married filing jointly. The federal tax on that conversion works out to roughly $12,000 to $13,000 per year, or somewhere near $50,000 across the full four-year plan.
Now run the alternative. Do nothing, and at 75 the IRS forces distributions from a balance that has grown to roughly $2.3 million. The first-year RMD alone is close to $87,000. Add two Social Security checks of roughly $45,000 each and the couple is pushing $175,000 of ordinary income before any dividends or interest. That drops them squarely into the 22% to 24% brackets, makes 85% of Social Security taxable, and, critically, trips IRMAA.
IRMAA Trap Nobody Prices In
Medicare uses a two-year lookback on modified adjusted gross income. A conversion done at 63 has zero IRMAA consequence because Part B does not start until 65. That is the entire point of front-loading the plan now rather than at 66 or 67. Once enrolled, a joint MAGI above roughly $212,000 adds surcharges that run $70 to $400+ per month per spouse. On two people, a single year over the top tier can cost close to $10,000 in Medicare premiums, and it repeats every year the income stays elevated.
A retiree in the 22% bracket who simultaneously triggers Social Security taxation and IRMAA faces an effective marginal rate near 40%. That is the arithmetic that turns a $140,000 projected tax bill into reality if the conversions are delayed. Executing them now, at a clean 12% to 22% effective rate with no Medicare exposure, is what erases it.
Where the Cash for the Tax Bill Should Sit
The conversion tax should be paid from a taxable account, never withheld from the conversion itself, because every dollar withheld is a dollar that stops compounding tax-free. With the 10-year Treasury yielding 5% and the fed funds upper bound at 4%, parking the four annual tax payments in short T-bills or a Treasury money market earns a real return while waiting for each April deadline.
Three Actions Before Year-End
- Model the conversion against the 22% ceiling. Target taxable income just under $206,700 for married filing jointly. Every dollar above that costs 24 cents federal, so size the conversion to the bracket ceiling.
- Coordinate the Social Security claim date with the conversion calendar. Filing for benefits during a conversion year adds provisional income and can pull 85% of the check into taxation. Delaying benefits until conversions finish preserves the clean bracket and locks in the 8% annual delayed retirement credit.
- Track MAGI against the first IRMAA tier once Medicare enrollment approaches. The 2028 tax year is the first one that will feed the 2030 Part B premium. If the four-year plan finishes on schedule, the couple exits the conversion window before any lookback year matters.
The mechanic that makes this work is the empty income years between retirement and Social Security, used deliberately, before Medicare closes the door. Those quiet years are the entire subject of our free guide to the Roth window, if you want to see how other households are sizing their own conversions.
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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!)
