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A 60-year-old single retiree with $1.7 million in a traditional 401(k) walked away from his job last year. He lives on $80,000 a year drawn from a $400,000 taxable account and plans to file for Medicare at 65. On paper, his retirement looks settled. The numbers say otherwise. He has roughly three calendar years to execute the most consequential tax move of his retirement before a Medicare rule quietly closes the window.
The IRMAA lookback that ends the party at 63
Medicare’s Income-Related Monthly Adjustment Amount uses a two-year MAGI lookback. A retiree turning 65 in 2031 will have Part B and Part D premiums priced off 2029 income. Any Roth conversion executed at age 63 or later lands inside that lookback window and feeds directly into the surcharge formula.
The cost of getting this wrong shows up in real dollars. Standard Part B in 2026 runs $202.90 a month. The top IRMAA tier pushes that to roughly $689.90 a month, a hit of about $5,844 a year per person on top of normal premiums, with a similar Part D adjustment layered on. A single $150,000 conversion executed at the wrong age can quietly cost five figures in Medicare premiums before the first RMD even arrives.
That is why the actionable window is ages 60 through 62. Conversions completed by December 31 of the year he turns 62 fall outside the IRMAA pricing year for his first Medicare enrollment. Wait one year too long and the math inverts.
Filling the 22% bracket three years in a row
Here is the conversion plan the numbers support. Using 2026 single brackets (12% to $48,475, 22% to $103,350, 24% to $197,300) and a standard deduction of roughly $15,200 under 65, he can convert enough traditional 401(k) dollars each year to bring taxable income up to the top of the 22% bracket without spilling into 24%.
Because he is living off the taxable account, his ordinary income before any conversion is close to zero. That means a conversion of approximately $103,350 in each of the next three years uses the 12% and 22% bands almost entirely. Three years of conversions totals roughly $310,000 moved into a Roth, at an average federal rate near 17%.
Compare that to leaving the money in place. RMDs starting at 73 typically push retirees with seven-figure traditional balances into the 22% to 24% brackets, and once Social Security is layered on, every additional dollar of RMD can make 85% of those benefits taxable. Pay 17% now or pay 24% plus an IRMAA surcharge later. The arbitrage is the entire game.
Why the macro backdrop pushes the timeline forward
The macro backdrop sharpens the urgency. Core PCE sits at the 91st percentile of its 12-month range, and the 10-year Treasury yield is 4.4%, in the 85th percentile of its 12-month band. Persistent inflation and elevated borrowing costs make future tax increases more likely as fiscal pressure builds, and the current bracket structure is already scheduled for review. Locking in a 17% effective rate against an unknown future rate is a defensible trade.
The Fed funds rate has been steady at 3.75% since mid-December 2025, which gives planning a stable rate backdrop for the next 12 months but does nothing to change the IRMAA calendar.
The execution checklist
- Pay the conversion tax from the taxable account, not from the conversion itself. Withholding from the 401(k) shrinks the amount that lands in the Roth and wastes bracket space. Sending an estimated payment from the $400,000 brokerage account preserves every converted dollar for tax-free compounding.
- Cap each year’s conversion at the top of the 22% bracket and verify against the IRMAA tiers. The first IRMAA threshold for single filers in 2026 is approximately $109,000 of MAGI. After Medicare begins at 65, throttle conversions to stay under that tier or accept the surcharge as a known cost.
- Confirm the 2026 numbers before writing the check. Pull current single brackets from IRS.gov and the IRMAA table from CMS.gov. Bracket widths, the standard deduction, and IRMAA tiers are inflation-adjusted annually, and a 1% miss on the bracket ceiling can move thousands of dollars into the 24% band.
The window does not reopen. Three conversion years, executed inside the lookback gap, are the difference between a retirement taxed at 17% and one taxed at 24% plus Medicare surcharges for life.