The Strategy Retirees Over 65 Are Using to Empty a $900,000 401(k) Into a Roth Before Their First RMD

Picture a married couple, both 66, retired, with $900,000 in a traditional 401(k) and neither spouse claiming Social Security yet. Born in 1960, they face no required minimum distribution (RMD) until age 75 under SECURE 2.0. That nine-year window is the most valuable tax planning opportunity they will ever have. The right move is converting the entire 401(k) to a Roth before those forced withdrawals begin.

A listener named Sue illustrated a small version of this on Suze Orman’s podcast. At 68, she had already converted $15,000 and had $75,000 left in her IRA. A $900,000 balance follows the same logic at a much larger scale, and scale is precisely where the tax traps emerge.

Why Waiting Until 75 Costs More

Leave the $900,000 untouched and it keeps compounding. At 75, the IRS Uniform Lifetime Table sets the divisor at 24.6, meaning a larger account balance forces larger annual withdrawals. Those withdrawals then pile on top of Social Security benefits claimed at 70, which grow through delay credits and annual cost-of-living raises. The 2027 inflation adjustment is already tracking toward 3.3%.

Wes Moss put it plainly on the Clark Howard podcast: retirees “find themselves in higher tax brackets because they might have a pension and when they get into their 70s, they have big IRAs. And those IRAs produce RMDs.” Converting early means paying tax on your own schedule, not the IRS’s.

Where the Real Ceiling Sits

For 2026, joint filers pay 22% on taxable income up to $211,400 and 24% from there to $403,550. The standard deduction for married couples filing jointly is $32,200 this year.

The bracket, however, is only part of the picture. Three additional thresholds create a tax cascade that can push the effective rate on each converted dollar toward 40%:

1. IRMAA: Medicare surcharges apply when joint modified adjusted gross income (MAGI) tops $218,000. Because Social Security looks back two years, a 2026 conversion sets 2028 premiums. Crossing the first tier lifts Part B from $202.90 to $284.10 per person per month.
2. Social Security taxation: Once benefits begin, joint provisional income above $44,000 makes up to 85% of those benefits taxable. Each additional dollar of Roth conversion income pulls more benefit dollars into the taxable column.
3. Senior deduction phaseout: The OBBBA senior deduction, worth up to $12,000 for a couple where both spouses are 65 or older, begins shrinking once joint MAGI exceeds $150,000 and disappears entirely at $250,000. This temporary deduction runs through 2028.

Because the senior deduction sits above the bracket calculation, filling the 22% bracket completely pushes MAGI past the $218,000 IRMAA line. In practice, the IRMAA threshold is the true ceiling for each year’s conversion.

A Four-Year Sprint, Then Smaller Chunks

Here is the sequence that works for this couple. From age 66 through 69, with Social Security not yet claimed, they convert roughly $200,000 a year (as an illustrative figure) while holding joint MAGI just under $218,000. With no benefits flowing in, the 85% benefit-taxation trap never activates. That pace moves the bulk of the balance before age 70 arrives.

Starting at 70, Social Security begins and provisional income jumps, so annual conversions shrink to whatever fits under the IRMAA threshold. Moss offered useful framing for this phase: “Typically the right way to do Roth conversions is in chunks spread out over time.” By 75, little or nothing should be left to force out. That quiet stretch before RMDs begin is the lowest effective tax rate most retirees will ever see again, which is why mapping the full window matters so much. A free Roth guide here walks through the full timeline.

The five-year rule is largely irrelevant at this age. As Orman explained to Sue, because she was over 59 and a half, “The 10% penalty does not apply to you.” Only early withdrawals of earnings carry additional tax exposure.

The tax on each converted dollar, roughly 22 cents, should be paid from a taxable account rather than from the 401(k) itself. With the 10-year Treasury trading around 5% in late 2026, cash set aside each year to cover that tax bill earns a real return while it waits.

Three Moves to Make This Year

1. Confirm your RMD start age. Born 1951 through 1959 means age 73. Born 1960 or later means age 75. Count the years remaining; that is your conversion window.
2. Convert in December, with your full income picture in hand. Once dividends, capital gains, and any part-time earnings are known, size the conversion to land just under $218,000 of joint MAGI. A 2026 conversion will set your 2028 Medicare premiums through the two-year lookback.
3. Hold off on Social Security if you can. Every year before you claim is a year of conversions free of the 85% benefit-taxation hit. If Social Security, a pension, and conversions together threaten to push past the first IRMAA tier, the complexity alone justifies hiring a fee-only advisor to model the full picture.

Editor’s note: This update corrects the 10-year Treasury yield reference from “near 5.1%” to “around 5%,” reflecting late-October 2026 trading levels, and expands the OBBBA senior deduction detail to include the $12,000 joint maximum and the $250,000 full phaseout threshold.

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