A 67-Year-Old Wants Smaller RMDs From Her $1 Million 401(k), but Moving $200,000 to a Roth Creates a Bill Today

Imagine a 67-year-old retiree with a fully pretax $1 million 401(k) reviewing a projection. One column shows her future required minimum distributions (RMDs) shrinking after a $200,000 Roth conversion. It looks like a win. What the chart leaves out is the tax she pays this year to get there.

She is a hypothetical case, but the scenario is common. Her problem comes down to two different numbers. A smaller RMD tells you only how much the IRS will force out of the account later. The conversion bill tells you how much leaves her pocket today. Whether she ends up ahead depends entirely on how today’s conversion bill compares with the taxes and other costs she avoids down the road.

How $200,000 Shrinks Her Future RMDs

Converting $200,000 leaves $800,000 in the pretax account before any market moves. Once converted money sits inside a Roth, it stops generating lifetime required distributions for her as the account owner.

Her RMDs start at age 73. IRS guidance under SECURE 2.0 sets that age for anyone born from 1951 through 1959, with the starting age rising to 75 for those born in 1960 or later.

The IRS Uniform Lifetime Table assigns a distribution period of 26.5 at age 73. Holding balances constant, the $1 million account would require roughly $37,736 in her first RMD year.

After the conversion, the $800,000 balance would require $30,189. That is $7,547 less in taxable income she is forced to take that year. Whether those future tax savings outweigh the upfront conversion bill is the real test.

Conversion Tax Hits in a Single Year

IRS guidance says converted pretax dollars count as gross income in the year of conversion. The full $200,000 lands on top of her pension, Social Security, interest, and anything else she reports that year.

Three factors set the price. The first is her other income. The second is how many tax brackets the converted amount climbs through. The third is whether the higher income triggers Medicare’s income-related monthly adjustment amounts (IRMAA), which raise both Part B and Part D premiums. For 2026, IRMAA kicks in once modified adjusted gross income exceeds $109,000 for a single filer or $218,000 for a couple filing jointly, based on the tax return from two years prior. Medicare bases those surcharges on earlier returns, so the premium increase can arrive well after the conversion is finished.

One legislative development that matters here: the One Big Beautiful Bill Act, signed in July 2025, added a $6,000 senior bonus deduction for each taxpayer aged 65 or older (up to $12,000 for a qualifying couple). That deduction runs through 2028 and stacks on top of the standard deduction. It does not change the formula for taxing Social Security benefits, and it did not alter RMD ages or retirement account rules, but it does reduce net taxable income in the conversion year, which may soften the marginal cost of converting.

How she pays the tax matters as much as the amount itself. Paying from cash held outside retirement accounts lets the full conversion amount grow inside the Roth. Withholding the tax from the conversion itself means the Roth ends up with less money, so she is effectively paying to shrink RMDs on dollars that never make it into the protected account.

One Big Conversion vs. Smaller Installments

The years before her RMDs begin are her conversion window. IRS guidance states that amounts already required to be distributed for a given year cannot be converted. Once RMDs begin, each year’s required amount must come out before any conversion can proceed, so converting earlier eliminates that complication.

A fair comparison runs both paths using the same investment returns and equal spending. One path is a single $200,000 conversion this year. The other is smaller installments spread across the years before she turns 73. The comparison then measures two results: total taxes paid and after-tax assets at the end. Installments often keep more income inside lower brackets and below the IRMAA entry threshold (the quiet years between retiring and the first RMD are the focus of our free Roth conversion window guide), but the right answer depends on her specific income picture.

Social Security belongs in the model. Federal law makes up to 85% of benefits taxable once other income exceeds the relevant thresholds, and IRS worksheets include pensions and other taxable income in that calculation. A large single-year conversion can pull more of her benefits into the taxable column for that year. Spreading the conversion across several years limits how much gets dragged in.

Before modeling any of this, she should confirm her exact RMD start date: age 73 for those born from 1951 through 1959, or 75 for those born in 1960 or later. Missing a required distribution triggers a 25% excise tax on the shortfall, reduced to 10% with timely correction, so getting the timeline right is not optional.

Judge the Plan by What She Can Spend

The RMD column is the easiest number to reduce and among the least useful to target in isolation. The real question is straightforward. After paying the conversion tax, any IRMAA surcharges, and any additional tax on Social Security, will she have more to spend over her lifetime, or more to leave her heirs, than if she had done nothing?

If a projection cannot answer that, she should ask for a version that shows the tax bill in the year it hits, side by side with the RMD savings. That comparison tells her whether to convert $200,000 now, spread it across several years, or leave the money where it is.

Editor’s note: This article was updated to include 2026 IRMAA income thresholds ($109,000 single / $218,000 joint based on 2024 MAGI) and to note that the One Big Beautiful Bill Act, signed July 2025, introduced a $6,000 senior bonus deduction for taxpayers aged 65 and older but left RMD ages, Social Security taxation formulas, and retirement account rules unchanged.

Contact [email protected] for any questions or corrections.