The IRS decides how much comes out of your 401(k) at age 75, and the ensuing tax cascade can push your effective marginal rate past 40%. There is a narrow window before time runs out, and…
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Imagine a 62-year-old with $900,000 in a traditional 401(k) and an approaching retirement date. He doesn’t want the IRS to fix his withdrawals later. If he leaves the account alone, the IRS starts making that call at 75 hours.
Many people are working on the same problem. On Reddit, a 54-year-old man with $720,000 in a 401(k) was told: “You will likely make a larger amount after age 65 once you have Medicare.” This timing can be costly.
75 is the cutoff date for anyone born in 1960 or later
Under current law, the minimum age required to begin distribution (RMD) is 75 for anyone who turns 74 after December 31, 2032. Our 62-year-old was born in 1964, so this rule covers him. If he skips a mandatory withdrawal, he may face a 25% excise tax, dropping to 10% if corrected in time.
Roth IRAs receive different treatment. The original owner never has to take required minimum distributions during his or her lifetime. Every dollar transferred to a Roth before age 75 is a dollar that the IRS cannot expel later.
Annual withdrawal of $91,250 which empties the account
Assume a 5% annual return and 13 years to age 75. To empty the account by then, he must withdraw about $91,250 at the start of each year.
If he doesn’t touch it, that same $900,000 will grow to about $1.7 million in 75 years.
The IRS lifetime uniform table divisor at this age is 24.6, so his first RMD is about $69,000.
At age 85, the divisor drops to 16.0, increasing the required share of the balance from about 4% to more than 6% per year.
Why $91,250 costs about 7% in federal taxes today
Let’s say he files a joint return and the withdrawal is the couple’s only taxable income at the start of retirement. The $32,200 standard deduction for 2026 leaves $59,050 in taxable income.
This is all in the 10% and 12% brackets, and the 12% bracket amounts to $100,800.
The federal bill comes to about $6,590, an effective rate close to 7%. Whatever portion he doesn’t need to live on can be rolled over directly into a Roth IRA through a taxable rollover. Emptying the account before taxes and spending the money are two separate decisions. This converted money can continue to grow, with qualifying tax-free withdrawals.
Tax cascade pending at age 75
Now imagine the account intact at age 75, with RMDs stacked on top of Social Security. When filing jointly, benefits begin to become taxable once combined income exceeds $32,000, and the second threshold is $44,000. Up to 85% of benefits may be taxable.
Within this phase-in range, each additional RMD dollar taxed at 22% results in 85 cents of benefit in taxable income at the same time. This equates to an effective marginal rate of around 41%.
After the year one spouse dies, the survivor typically files as a single spouse. Under the 2026 rules, the first Medicare surcharge threshold increases from $218,000 to $109,000.
Medicare’s Two-Year Retrospective Analysis Creates Opening at Age 62
The Medicare Income-Related Monthly Adjustment Amount (IRMAA) generally uses income from two years earlier. A conversion at age 62 will generally not affect one’s Medicare premiums at age 65. From age 63, conversions may affect future premiums. That makes age 62 an attractive window, although pre-Medicare health insurance costs are also significant.
Under the 2026 rules, a $91,250 conversion alone falls below the common threshold of $218,000. Add to that a significant capital gain and the couple could cross it.
The first tier adds $81.20 per month per person to the standard Part B premium of $202.90, plus $14.50 for Part D.
Three things to do before your next birthday
- Determine your own drain number. Use your balance, a conservative return, and the years remaining until your RMD age. This gives you the annual amount that must come out of the account before taxes, and you will see right away if it is in the 12% or 22% bracket.
- Voluntarily fill your bracket and track Medicare income starting at age 63. Size each year’s conversion based on your tax bracket and that year’s Medicare thresholds (2026: $218,000 joint or $109,000 single), including other income.
- Pay the conversion tax from a taxable brokerage or savings account. This is where your other assets decide if it works. Covering the tax on the 401(k) itself means less money flows into the Roth and the benefit becomes much smaller.
For a married couple who can convert at about 7% now instead of facing a potential marginal rate of 41% later, emptying the 401(k) on their own schedule proves advantageous.
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