The 401(k)-to-Roth Fill Strategy That Saves a Couple With $300,000 Income $145,000 in Taxes Over 8 Years

Quick reading

• Roth conversion of $400,000 over 8 years at 12% saves $145,000 vs. forced RMDs of 24% plus IRMAA surcharges.

• Converting between ages 65 and 73, before RMDs, forces income into higher levels and incurs Medicare premium penalties.

• Are you ahead or behind in your retirement? SmartAsset’s free tool can connect you with a financial advisor in minutes to help you answer that question today. Each advisor has been carefully vetted and must act in your best interests. Don’t waste another minute; Learn more here.

A 60-year-old couple making $300,000 a year with $1.8 million in a traditional 401(k) plan faces a problem that most higher-income people don’t see until it’s too late. Every dollar in that account is a future tax liability, and the IRS can choose the pool. The good news: There’s a 13-year window between now and the first required minimum distribution in 73, where the couple decides which pool those dollars come out of.

The strategy is to fill the brackets: convert traditional 401(k) money to Roth in years when marginal rates are lowest, intentionally pushing taxable income to the top of a chosen bracket and stopping there. If done right for eight years after retirement, this couple saves approximately $145,000 in lifetime taxes.

Why the period from 65 to 73 years is the period of greatest leverage in retirement

While both spouses are still working, their household income puts them squarely at the 24% federal level. Conversions today are possible but expensive. The math changes the moment the paychecks end.

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After retiring at age 65, salaries drop to zero. If Social Security is delayed until age 67 or 70, the couple will have a series of years of almost no taxable income on autopilot. The 2026 MFJ 22% bracket ranges from $96,950 to $206,700 of taxable income, and the 12% bracket falls below it. Without salaries, the couple can deliberately generate income by converting the traditional 401(k) from dollars to Roth, filling the 12% bracket each year before letting the 22% bracket touch a single dollar.

Mathematics year after year

Convert $50,000 a year for eight years, between ages 65 and 73. That moves $400,000 from the traditional 401(k) to a Roth, where it grows tax-free forever and never triggers an RMD.

Tax cost at the 12% marginal rate: approximately $48,000 over eight years.

The counterfactual is ugly. Let’s leave that $400,000 in the 401(k), let it fester, and the IRS will kick it out as RMDs starting at 73. Combined family income from Social Security, pensions, dividends, and required distributions plausibly lands in the marginal 24% bracket, costing about $96,000 in federal taxes on the same dollars. Add to this the Medicare IRMAA surcharges of approximately $30,000 during the affected years, and the path of doing nothing costs about $145,000 more than the path of filling the brackets.

With the underlying PCE near 0.7% month over month and the 10-year Treasury at 4.47%, the range-shifting risk in RMD futures is real.

Three details that make or break the strategy

1. Pay the conversion tax from a taxable account, not the IRA. Withholding taxes on the conversion itself reduces the amount that goes to the Roth and erodes the entire benefit. A separate brokerage or savings account must fund the IRS check for the full $50,000 to arrive.

2. Watch IRMAA’s two-year retrospective. Once Medicare begins at age 65, MAGI from two years earlier sets the premium surcharge. Maintain MAGI below the MFJ Tier One IRMAA threshold of $218,000 in any conversion year, or knowingly accept the surcharge. A $50,000 conversion added to Social Security and dividends can quietly cross a tier line and add hundreds per month to Part B and D premiums per spouse.

3. Check your state tax angle before converting. A conversion made while living in a jurisdiction with a 9% state income tax is a different deal than one made after moving to Florida, Texas or Tennessee. Some retirees explicitly time their conversions for the year they take up residence in a state without income taxes, which can add tens of thousands to their savings.

What to do before the next fiscal year closes

Run a projection of taxable income for ages 65 to 72, assuming you claim Social Security at age 67 or 70. Identify the gap between projected taxable income and the top 12% bracket. That gap is the annual conversion goal.

Obtain the current 401(k) plan document and confirm that Roth conversions are allowed within the plan, or plan a rollover to an IRA at retirement for conversion flexibility. And because the conversion strategy interacts with Social Security claims, IRMAA levels, and state residency in ways that no calculator fully captures, a fee-only CFP or CPA who quotes a flat fee for the project is worth spending on a portfolio of this size.

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