From Yahoo Finance · · 1m 40s
Which Account Goes First? The Question Every Couple With $1.4 Million Should Answer Before 65
Couples with $1.4M must decide which account to touch first before 65 to avoid Medicare surcharges.
In brief
Couples with $1.4M must decide which account to touch first before 65 to avoid Medicare surcharges. A 63-year-old couple with $1.4 million must convert 401(k) to Roth IRA before 65 to prevent 40% tax rates from Social Security and IRMAA surcharges. Originally reported by Yahoo Finance.
The 63-Year-Old Couple's $1.4 Million Challenge
A 63-year-old couple with $1.4 million across traditional 401(k), Roth IRA, and taxable brokerage accounts must act before 65 to avoid Medicare surcharges.
Medicare's Two-Year Lookback Trap
Medicare uses a two-year lookback on modified adjusted gross income to set Part B and Part D premiums, meaning 2026 withdrawals affect 2028 IRMAA surcharges.
The 22% Tax Bracket Ceiling
The 22% tax bracket ceiling at $206,700 allows couples to run partial Roth conversions from 401(k) to shrink the traditional balance before RMDs hit at 73.
Tax Cascade Risk
If 85% of Social Security becomes taxable and IRMAA surcharges stack, a couple in the 22% bracket faces an effective marginal tax rate near 40% on 401(k) withdrawals.
The Three Actions Before 65
Model a conversion ladder to the 22% bracket ceiling, build a two-year Treasury reserve, and coordinate Social Security claiming with the conversion window.
Why 63 to 65 Is Critical
Inaction between 63 and 65 can push effective marginal tax rates near 40% when 85% of Social Security becomes taxable and IRMAA surcharges stack simultaneously.
The Consequence of Doing Nothing
A couple in the 22% bracket triggering both IRMAA and Social Security taxation faces an effective marginal tax rate near 40% on the next dollar of 401(k) withdrawal.
The takeaway
A 63-year-old couple with $1.4 million must convert 401(k) to Roth IRA before 65 to prevent 40% tax rates from Social Security and IRMAA surcharges.
