The years between retiring and required distributions
A hypothetical married couple, both 60, plan to stop working at 62. They have $1.6 million in traditional 401(k)s, $100,000 in a Roth IRA and $200,000 in a brokerage account. They spend $9,000 a month and will both claim Social Security at 67. Their required withdrawals start at 75.
From 62 until Social Security begins, they'll live mostly on the brokerage account, and their taxable income will be close to zero. As our tax-bracket article showed, that's the lowest it'll be for the rest of their lives. The usual suggestion for years like these is to convert part of the 401(k) to a Roth while the tax on it is low. We tried seven ways of doing that for this couple. Converting a little came out about even with converting nothing. Converting more cost them their health insurance subsidy and left them $245 to $422 a month less to spend.
Three income limits that change the cost
A conversion adds to your income for the year. What it costs depends on which of these limits the extra income crosses:
- The top of a tax bracket. For a married couple in 2026, the 12% bracket ends at $100,800 of taxable income, which is about $133,000 before the standard deduction. Above it, each converted dollar is taxed at 22%.
- The marketplace subsidy cutoff. Before 65, anyone buying their own health insurance gets a premium tax credit only while household income stays at or under 400% of the federal poverty level. For a couple, that's $86,560. One dollar over loses the whole credit. Conversions count toward that income, and so do gains from selling investments in a brokerage account.
- The first Medicare surcharge. From 65, a couple with income over $218,000 pays more for Part B and Part D. Medicare looks at your tax return from two years earlier, so a conversion at 63 can raise your premium at 65.
What each option did from 62 to 64
These are the three years of retirement before Medicare, added together, in today's dollars. “Health insurance” is what they pay after any subsidy.
| Option | Converted | Federal tax | Health insurance |
|---|---|---|---|
| No conversions | $0 | $3,088 | $16,157 |
| Stay under the subsidy cutoff | $71,995 | $11,286 | $58,175 |
| Convert $20,000 a year | $60,000 | $24,885 | $51,105 |
| Fill the 12% bracket | $181,414 | $54,017 | $119,146 |
| Fill up to the first Medicare surcharge | $277,956 | $81,413 | $119,146 |
| Fill the 22% bracket | $395,147 | $117,631 | $119,146 |
| Fill the 24% bracket | $832,034 | $254,092 | $119,146 |
With no conversions, the couple stays under the cutoff in all three years. The two small conversion options keep the subsidy at 62 and 63 and lose it at 64, when more of that year's spending comes from the 401(k), which counts as income.
The four largest options go over the cutoff from the first year. Their health insurance costs about $103,000 more over the three years than with no conversions. Filling the 12% bracket also means about $54,000 in federal tax over those years, against about $3,100 with none. At 64, their spending alone fills the 12% bracket, so that option converts nothing that year.
Which options left them more to spend
We then followed each option to age 95 in the same set of simulated markets. The table shows how much the couple could spend each month, after tax and health insurance, and still not run out before 95 in 9 out of 10 of those markets:
| Option | Monthly spending |
|---|---|
| No conversions | $9,843 |
| Stay under the subsidy cutoff | $9,823 |
| Convert $20,000 a year | $9,784 |
| Fill the 12% bracket | $9,598 |
| Fill the 24% bracket | $9,571 |
| Fill up to the first Medicare surcharge | $9,447 |
| Fill the 22% bracket | $9,421 |
The top three are within $59 a month of each other, which is too close for the simulation to call. For this couple, converting a little while keeping the subsidy comes out about even with not converting. The same goes for the 12% and 24% options, $27 apart, and for the Medicare and 22% options, $26 apart, so their order means little. The four largest options came out $245 to $422 a month lower than no conversions.
Filling the 22% or 24% bracket does empty the traditional accounts before 75, so these options leave no required withdrawals and no tax on them later. For this couple, the tax paid in their 60s and the subsidy they gave up from 62 to 64 cost more than those later savings.
When the answer could change
The subsidy is what tipped this example. Someone who retires at 65 or later goes straight onto Medicare, so there's no subsidy to lose. The same is true for someone with health coverage from a former employer, or a couple whose income is already over the cutoff. For them, the comparison comes down to the tax brackets and the Medicare surcharge, and the bracket options may rank differently.
A larger traditional balance raises the required withdrawals later, which makes paying tax early worth more. A spouse who outlives the other files single, in narrower brackets, which also makes paying tax early worth more. Either can change which option comes out ahead, and by how much depends on your own figures.
Start your plan to see your own taxable income for each year before required withdrawals. MangoDime Plus compares these same seven options on your plan, including your health insurance.
What this doesn't model
- Options within about $60 a month of each other are a tie. The simulation can't separate results that close.
- The simulation applies the Medicare surcharge to the same year's income, not the tax return from two years earlier. So it misses the surcharge that a large conversion at 63 or 64 would trigger at 65 or 66, which would lower the larger options further.
- Tax brackets are held at 2026 levels, in today's dollars, for the whole plan.
- This example assumes a state with no income tax.
General information, not investment, tax or legal advice.
Last updated October 30, 2026 · MangoDime