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 the tax on benefits, but at 63, both problems are closer than they look, and neither shows up 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. It is based on your tax return from two years earlier. Income reported at 63 sets premiums in the year you turn 65, which is the first year most people enroll. This couple is building their Medicare bill right now.

For 2026, the standard Part B premium is $202.90 a month. Joint filers with modified adjusted gross income (MAGI) above $218,000 pay $284.10, and the levels climb from there. Single filers hit the first levels above $109,000.

A $48,000 withdrawal sits far below either line. Their real IRMAA risk is a one-time income spike. It could come from a home sale with a large gain, a final-year bonus, or a lump-sum 401(k) withdrawal to replace a roof.

Most of the 12% Bracket Goes Unused

For 2026, married couples filing jointly can subtract $32,200 from their income. That deduction takes up a large share of the $48,000, and the rest lands in the 10% and 12% brackets. The 12% bracket for joint filers runs up to $100,800 of taxable income before the 22% rate applies.

That unused space is the opportunity. Benefits and mandatory account withdrawals haven’t started yet, so this couple is sitting in the cheapest tax years they will likely ever see and using only a fraction of them.

Where Social Security Taxation Bites

Before claiming, the couple has zero taxable benefits, so the headline promise holds automatically at 63. The trouble arrives with the first check. Benefit taxation runs 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% above $44,000.

A $48,000 traditional 401(k) withdrawal tops that $44,000 line before a single benefit dollar is counted. Once benefits begin, spending the same $48,000 from pre-tax money guarantees taxable benefits. In that zone, each extra 401(k) dollar can drag up to 85 cents of benefits into taxable income, pushing a 12% bracket retiree to a marginal rate well above 12%.

Those thresholds have never been indexed for inflation. The 2027 cost-of-living adjustment looks likely to land near 3.3%, and every raise pushes more benefit dollars over the fixed lines.

Convert Now, Spend Roth Later

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

Even a conversion that fills the entire 12% bracket leaves joint MAGI well below the $218,000 first IRMAA levels. After benefits begin, the couple can blend a smaller traditional withdrawal with Roth dollars, hold provisional income near the $32,000 line, and still spend $48,000 (we sized up this pre-RMD conversion window in a free Roth guide here: The Roth Window).

Cash reserves count too. A 1-year CD pays a national average of 1.73%, and that interest flows into both provisional income and MAGI.

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.

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