A $600,000 401(k) to Roth IRA conversion plan avoids higher future taxes and Medicare surcharges for retirees.
A 63-year-old couple with $1.5 million in a traditional 401(k) is converting $600,000 to a Roth IRA in $75,000 annual increments. The strategy locks in tax rates below 22% before required minimum distributions (RMDs) and Social Security benefits increase taxable income at age 73.
By spreading conversions below the $218,000 IRMAA threshold, the couple avoids Medicare surcharges of up to $6,900 per person. The standard deduction of $32,200 and 12%-22% tax brackets provide a window to minimize tax liability before RMDs begin.
Delaying Social Security until age 70 boosts annual benefits by 8% while keeping taxable income low, maximizing Roth conversion headroom during the pre-RMD period.