How a 63-Year-Old Can Pull $48,000 a Year From a $1.2 Million 401(k) Without Triggering IRMAA or Taxing Social Security

A married couple, both 63, has $1.2 million in a traditional 401(k), no pension, and a plan to pull $48,000 a year while they wait to claim Social Security. They want to cover living costs without losing part of every withdrawal to Medicare surcharges or benefit taxes. At 63, both traps are closer than they look, and neither appears on this year’s tax return.

Your Age 63 Tax Return Sets Your Medicare Bill at 65

Medicare’s income-related monthly adjustment amount (IRMAA) is a surcharge on Part B and Part D premiums, and it is based on the tax return filed two years earlier. Income reported at 63 sets premiums for the year you turn 65, which is when most people first enroll. This couple is building their Medicare bill right now, whether they realize it or not.

For 2026, the standard Part B premium is $202.90 a month. Joint filers whose modified adjusted gross income (MAGI) tops $218,000 pay $284.10, and the tiers climb from there. Single filers cross the first threshold at $109,000.

A $48,000 withdrawal sits comfortably below either line. The real IRMAA danger is a one-time income spike: a home sale with a large capital gain, a final-year employment bonus, or a lump-sum 401(k) withdrawal to fund a major home repair.

Most of the 12% Bracket Goes Unused

For 2026, married couples filing jointly can subtract $32,200 from their income as the standard deduction. That alone consumes most of the $48,000 withdrawal, and whatever remains lands in the 10% and 12% brackets. The 22% rate does not apply until taxable income exceeds $100,800 for joint filers.

That unused bracket space is the real opportunity here. Because Social Security and required minimum distributions have not started yet, this couple is living through the cheapest tax years they will likely ever see, and they are using only a fraction of that capacity.

Where Social Security Taxation Bites

Before claiming, the couple reports zero taxable benefits, so the headline promise holds automatically at 63. The trouble begins with the first check. Benefit taxation turns on provisional income: adjusted gross income plus half of Social Security. For joint filers, up to 50% of benefits become taxable above $32,000, and up to 85% become taxable above $44,000.

A $48,000 traditional 401(k) withdrawal already clears that $44,000 line before a single benefit dollar is counted. Once benefits begin, pulling the same $48,000 from pre-tax money guarantees that benefits are taxable. In that zone, each additional 401(k) dollar can pull up to 85 cents of benefits into taxable income, pushing a 12%-bracket retiree’s effective marginal rate well above what the bracket table suggests.

Those thresholds have never been indexed for inflation. The Social Security Administration officially announced the 2027 cost-of-living adjustment at 3.6% in October 2026, and every annual raise pushes more benefit dollars over the fixed provisional-income lines.

Convert Now, Spend Roth Later

The fix is to treat the years between now and claiming as a Roth conversion window. Each year, shift enough traditional money to fill the 12% bracket. Those dollars are taxed at 10% and 12% today. Later, Roth withdrawals do not count toward provisional income or MAGI, so they remain invisible to both the benefit formula and IRMAA. Roth 401(k)s also carry no required minimum distributions, a rule that has been in effect since 2024.

A conversion that fills the entire 12% bracket still leaves joint MAGI well below the $218,000 first IRMAA threshold. After benefits begin, the couple can blend a smaller traditional withdrawal with Roth dollars, keep provisional income near $32,000, and still spend $48,000 (for a deeper look at sizing this pre-RMD window, see our free guide here: The Roth Window).

Cash reserves matter too. As of late October 2026, the national average yield on a one-year CD is 2.17%, and that interest flows directly into both provisional income and MAGI. Competitive online banks are offering considerably more, so where the couple parks their cash cushion is not a trivial decision.

Three Moves to Make Before December 31

1. Run a 2026 tax projection and find the gap between your expected taxable income and the $100,800 top of the 12% bracket. That gap is your conversion budget, and conversions must be completed by December 31 to count for 2026.
2. Map your Social Security claiming age against your conversion window. Each year you delay claiming adds another year of conversions with no benefits exposed to tax, while Social Security’s delayed credits keep growing your future check.
3. Flag any one-time income event planned for 2026 or 2027, because those returns set your Medicare premiums at 65 and 66. If a home sale or final-year bonus could push joint MAGI past $218,000, split it across tax years. If retirement later cuts your income, file Form SSA-44 to request a lower IRMAA determination.

Editor’s note: This article has been updated to reflect the Social Security Administration’s official 2027 cost-of-living adjustment of 3.6%, announced October 14, 2026, replacing an earlier projection of approximately 3.3%, and to reflect the current national average one-year CD yield of 2.17% as of late October 2026.

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