A 68-Year-Old With $1.1 Million in a 401(k) Just Found Out Her RMDs Will Hand the IRS $290,000, and She Has Five Years to Shrink It
Her 401(k) balance keeps growing, her RMD clock keeps ticking, and the window to act closes in 2030. A closer look at her situation reveals why doing nothing is the most expensive choice she can make.
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A 68-year-old single retiree has $1.1 million in a traditional 401(k). She added up the taxes on her future required minimum distributions (RMDs) and landed on a federal bill near $291,000. The withdrawals begin in 2031, whether or not she spends a dollar of them.
This is a problem many people are working through. On Reddit, one person asked how to convert a 401(k) to a Roth before RMDs start, and a reply summed up the job: “You need to average $62,500 in conversions each year.”
Her RMD Clock Starts at 73 in 2031
She was born in 1958, so she turns 73 in 2031.
Under SECURE 2.0, anyone who reaches 72 after December 31, 2022 has an applicable age of 73 if reached before January 1, 2033.
The later age-75 start applies only to younger people. That gives her 2026 through 2030 to act.
How $1.1 Million Turns Into $1.21 Million of Taxable Income
Assume her account grows 4% a year and she takes nothing out. By the end of 2030 it reaches about $1.34 million. Her first RMD is that balance divided by the IRS Uniform Lifetime Table factor of 26.5, which comes to roughly $50,500.
The divisor gets smaller every year, so the share she must take continues going up while the balance continues growing. At 77 her RMD is about $58,100.
At 90 the divisor falls to 12.2 and the required withdrawal reaches roughly $83,200.
From 73 through 90, her RMDs add up to about $1.21 million. At an assumed 24% marginal rate, that’s roughly $291,000 in federal tax. Her actual returns, future tax brackets, extra withdrawals and how long she lives will drive that figure up or down.
Social Security and Medicare Push Her Real Tax Rate Higher
Her RMDs get added to her Social Security income. For a single filer, benefits start becoming taxable once provisional income passes $25,000, and the 85% inclusion rate kicks in above $34,000.
In that range, every extra $1,000 of RMD pulls another $850 of benefits into taxable income. If she’s in the 22% bracket, her real rate on that money is about 41%.
Medicare is the second hit. Single filers with income up to $109,000 pay the standard Part B premium of $202.90 a month in 2026.
Go above that line and IRMAA (Medicare’s income-based surcharge) adds $81.20 a month to Part B and $14.50 to Part D. That’s about $1,148 a year, and the surcharge grows at higher incomes. Medicare uses your tax return from two years earlier, so income she reports at 68 sets her premiums at 70.
What Five Years of Roth Conversions Can Do
Say she converts $80,000 to a Roth at the end of each year in that window. At a 22% rate, she pays $17,600 a year in federal tax up front.
Her pre-tax balance at the end of 2030 drops to about $905,000, and her first RMD falls to roughly $34,200.
Her total RMDs from 73 through 90 fall to about $820,000. Paying 22% now to avoid future withdrawals taxed at 22% plus the Social Security and IRMAA add-ons is a good deal.
Converting into the 32% bracket can be a losing trade. That bracket starts at $201,776 of taxable income for single filers, and paying it now to avoid a future 24% rate makes no sense. A conversion works best when the tax she pays now is lower than what those RMDs would cost later.
Three Moves to Make Before 2031
- Drive Social Security back to 70 if her cash flow allows. Until she claims, Social Security taxation doesn’t apply. Conversions at 68 and 69 won’t make unclaimed Social Security taxable, though Medicare premiums and other tax costs still matter. Those two years may be her cheapest window.
- Size each conversion against two limits: the 24% bracket, which starts at $105,701 of taxable income in 2026, and the applicable IRMAA threshold ($109,000 for singles in 2026). IRMAA works like a cliff: going one dollar over triggers the full surcharge two years later, so run a projected tax return each November before she decides how much to convert.
- If she gives to charity, consider rolling the 401(k) into an IRA before making QCDs. Qualified charitable distributions (QCDs) can come only from an IRA, and the 2026 limit is $111,000 per person. Once RMDs begin, gifts sent straight from the IRA count toward her IRA RMD and stay out of her adjusted gross income (AGI), which helps keep Social Security taxes and IRMAA down.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
