$1M Traditional 401(k): Annual Roth Conversion Target by Bracket

The $1M traditional 401(k) is the single most common high-balance retirement account in the US, and the 10 calendar years between retirement at 63 and the first RMD at 73 (born 1951-1959 under SECURE 2.0 §107) are the highest-leverage tax window most people will ever have. Each dollar you convert from traditional to Roth IRA during the gap years is taxed at your current marginal rate under IRC §408A(d)(3) instead of your future post-RMD marginal rate. For most retirees with $1M+ in pre-tax assets, those future rates are higher than the gap-year rates — sometimes by 10+ percentage points. Compounded over 20 years of retirement, the conversion arbitrage moves $150,000-$300,000 in lifetime tax.

The question is not whether to convert. It is how much per year, and which bracket to fill. The answer changes with filing status, retirement spending, state of residence, and IRMAA exposure. Below: the framework, the bracket-by-bracket math, and worked examples for $1M holders at three different income profiles.

The 2026 federal brackets that frame the decision

From IRS Rev. Proc. 2025-32 (verified against `references/stats.md`):

• 12% bracket: $11,925 - $48,475 (single) | $23,850 - $96,950 (MFJ)
• 22% bracket: $48,475 - $103,350 (single) | $96,950 - $206,700 (MFJ)
• 24% bracket: $103,350 - $197,300 (single) | $206,700 - $394,600 (MFJ)
• 32% bracket: $197,300 - $250,525 (single) | $394,600 - $501,050 (MFJ)
• Standard deduction 2026: $15,750 single | $31,500 MFJ | additional $1,600 (single) or $1,250 (MFJ each) for age 65+

Above the brackets sits the 2026 IRMAA threshold at $103,000 (single) and $206,000 (MFJ) MAGI — nearly identical to the top of the 22% bracket. This is not a coincidence: it makes the IRMAA threshold the de facto conversion ceiling for most retirees, even before the 24% bracket bite arrives.

The conversion-target formula

Your annual conversion target is the largest amount that keeps your total taxable income at or below the top of the bracket you're filling. Steps:

1. Project your other taxable income for the year: pension, taxable brokerage dividends and capital gains, rental income, partial Social Security if already claiming, any wages.
2. Add back the standard deduction (your bracket math operates on taxable income, but you want to convert to the bracket top in gross terms; effectively, your conversion can be (bracket top) + (standard deduction) - (other income)).
3. Subtract a buffer ($500-$1,000) for surprise income.
4. Cap at the IRMAA threshold if you are 63+ and care about Medicare premiums two years out.

Worked formula for a single filer targeting the 22% bracket top in 2026: Conversion = $103,350 (bracket top) + $15,750 (SD) - other_income - $1,000 (buffer) = $118,100 - other_income. With $10,000 in other income, conversion = $108,100. With $30,000 in other income, conversion = $88,100.

Bracket-by-bracket arithmetic on a $1M balance

Filling only the 12% bracket: conservative target

For a single filer with no other income, 12% bracket top + SD = $48,475 + $15,750 = $64,225 of conversion fills the 12% bracket. Tax: 10% on first $11,925 + 12% on next $36,550 = $5,578 federal. Effective rate: 8.7%.

Over 10 years, conversions of $64,225/year × 10 = $642,250 moved from traditional to Roth. Total federal tax at 12% bracket fill: $55,780. Average annual tax cost: $5,578.

At year 10 the traditional 401(k) balance has dropped from $1M to roughly $400K (assumes 6% net return on the shrinking balance, $64K/year converted, and the converted balance grows tax-free in the Roth). First-year RMD at 73 on $400K: $400K / 26.5 = $15,094 — manageable.

Filling the 22% bracket: aggressive target

For a single filer with no other income, 22% bracket top + SD = $103,350 + $15,750 = $119,100 of conversion fills the 22% bracket. Tax: 10% on $11,925 + 12% on $36,550 + 22% on $54,875 = $17,650 federal. Effective rate: 14.8%.

But IRMAA kicks in at $103,000 MAGI. Convert only to the IRMAA cap: $103,000 - other_income - $0 add-back (tax-exempt interest, which most retirees should minimize) = $103,000 of conversion. Tax: roughly $15,015 federal. Cap below IRMAA.

Over 10 years: $103,000/year × 10 = $1,030,000 attempted to convert. But the $1M starting balance has grown to roughly $1.6M by year 10 (6% returns minus conversions). Realistic conversion total: $1,030,000 over the 10 years — converts the entire original balance plus growth. Total federal tax: roughly $150,000. Average annual tax cost: $15,015.

At year 10, traditional balance is roughly $200K (residual growth that conversions couldn't keep up with). First-year RMD on $200K: $7,547. Combined with Social Security at 70 of $40K+, well below the 24% bracket. The retiree has effectively eliminated the future RMD bracket-creep problem at the cost of $150K in tax paid up front.

Filling the 24% bracket: maximum target, narrow case

For a single filer with no other income, 24% bracket top + SD = $197,300 + $15,750 = $213,050 of conversion. Tax: $40,196 federal. Effective rate: 18.9%.

IRMAA cost at this MAGI level: Tier 3 ($161K-$193K MAGI) and Tier 4 ($193K-$500K) surcharges — approximately $4,878-$5,327/year per spouse on Medicare. For a single filer, that is $4,878/year of Medicare cost layered on top.

Over 10 years: $213,050/year × 10 = $2,130,500 of conversion — far exceeds the original $1M balance plus growth. The retiree exhausts the traditional balance well before year 10. Realistic total: $1.6M converted in roughly 7-8 years at this pace. Total federal tax: roughly $300,000. IRMAA surcharges: $35K-$45K cumulative over the conversion period.

Whether the 24% conversion is worth it depends on the projected RMD-era marginal rate. If post-70 RMDs + SS + portfolio income push you to a 32% marginal rate (which can happen for $2M+ households), the 24% conversion is still 8 percentage points of arbitrage. If your projected RMD-era rate is 24%, you're paying tax now at the same rate — only the IRMAA delay and Roth tax-free growth justify the conversion.

The MFJ math: more room, same logic

Married filing jointly doubles most of the bracket widths. For a married couple both age 63 with no other income:

• 12% bracket fill: $96,950 + $31,500 SD = $128,450 of conversion. Tax: $11,156. Effective rate: 8.7%.
• 22% bracket fill: $206,700 + $31,500 = $238,200 of conversion. Tax: $35,302. Effective rate: 14.8%. IRMAA cap binds at $206,000 MAGI — convert only to $206,000 - other income.
• 24% bracket fill: $394,600 + $31,500 = $426,100 of conversion. Tax: $80,392. Effective rate: 18.9%. IRMAA Tier 3-4 territory.

For most MFJ couples with $1M balances, the IRMAA-capped 22% conversion at roughly $200K/year is the aggressive end. Over 10 years that converts $2M — doubles the original balance, captures full original principal plus growth.

Worked example: Sarah, age 63, single, $1M traditional, $20K rental income

Sarah is 63, single, just retired from a hospital administrator role. She has $1M in a traditional IRA (rolled from her 403(b)), $300K in a taxable brokerage, $50K in a Roth IRA, a paid-off house in Charlotte, and $20,000/year of net rental income from a small property. She plans to claim SS at 67 (FRA) and her PIA is $2,800/month.

Year 1 (age 63): aggressive 22% bracket fill with IRMAA cap

Other taxable income: $20,000 (rental) + roughly $5,000 (brokerage dividends) = $25,000. IRMAA cap: $103,000 MAGI. Conversion target: $103,000 - $25,000 - $1,000 buffer = $77,000 conversion. Total AGI: $102,000. Taxable income: $102,000 - $15,750 SD = $86,250 — within the 22% bracket. Federal tax: roughly $14,400. IRMAA in year 3 (her age 65): zero, because MAGI is at the threshold.

Years 1-4 (ages 63-66): pre-SS pure conversion

Same target: ~$77,000/year. Total converted over 4 years: $308,000. Total federal tax: $57,600. Traditional balance at end of year 4: roughly $850,000 (started at $1M, withdrew $308K but earned 6% on shrinking balance).

Year 5 (age 67): SS begins, conversion shrinks

Sarah starts SS at FRA: $33,600/year (full PIA $2,800 × 12 months). Taxable SS at 85%: $28,560. Other taxable income: $20,000 rental + $5,000 dividends + $28,560 SS = $53,560. Conversion target capped by IRMAA: $103,000 - $53,560 - $1,000 = $48,440. Tax on conversion + other: roughly $14,000.

Years 5-9 (ages 67-71): SS-era conversions

~$48,440/year × 5 = $242,200 additional converted. Total federal tax over 5 years: roughly $70K (rises slightly each year due to SS COLA).

Year 10 (age 72): last gap year before RMD

Same target: ~$48,000 conversion. Cumulative converted: $308,000 + $242,200 + $48,000 = $598,200 over 10 years.

Traditional balance at age 73: roughly $560K (started at $1M, converted $598K, but earned 6% returns on shrinking balance). First-year RMD at 73: $560K / 26.5 = $21,132. Compare to: no-conversion scenario first-year RMD at 73 on a balance grown to roughly $1.8M = $67,925.

Lifetime tax savings vs no-conversion path

No-conversion path: at 73 onward, RMDs of $68K+ plus SS plus rental push Sarah into 24% bracket and Tier 2 IRMAA territory. Cumulative federal tax + IRMAA over ages 73-90: roughly $480,000.

Conversion path: RMDs of $21K plus SS plus rental keep Sarah in 22% bracket and below IRMAA tier 1. Cumulative federal tax + IRMAA over ages 73-90: roughly $235,000. Plus the conversion-era tax already paid of roughly $200,000. Total conversion-path lifetime tax: $435,000. Total no-conversion lifetime tax: $480,000. Net savings: $45,000.

The conversion-path savings would be much larger ($150K+) if Sarah's projected no-conversion marginal rate were 24% throughout retirement (high-income retirees) instead of bouncing between 22% and 24%. The $45K figure here is for a moderate-income retiree where the conversion is primarily about IRMAA avoidance plus Roth tax-free growth, not bracket arbitrage.

The position: at $1M+ traditional balance, conversion is almost always right — sized to IRMAA, not to bracket top

From MoneyMap US Position 3: "Most retirees with $1M+ in pre-tax accounts who retire before SS / RMDs should aggressively Roth-convert in the gap years — typically 60-73. This is the single most underused strategy in retirement planning."

The bracket math says fill 22% if your projected RMD-era marginal is 22%+. Almost all $1M+ holders have projected RMD-era marginal of 22%+ once SS + RMDs + IRMAA stack. So the answer is: convert. The constraint that actually binds is IRMAA, not the bracket top. Convert up to the IRMAA threshold (or one tier above if your spending is high enough that the extra Medicare cost is dwarfed by the lifetime arbitrage). Stop at the IRMAA threshold unless you have a specific reason to push past it.

Where conversion is the wrong move

• Charity-bound estate: if your IRA balance will pass to a 501(c)(3) at death, you would have paid zero tax on those dollars anyway. Converting wastes the tax payment. Use a qualified charitable distribution (QCD) at 70½+ to satisfy RMDs without converting.
• ACA marketplace subsidy preservation (62-64): a conversion that pushes you off the ACA premium subsidy can cost more than the conversion saves. Wait until Medicare kicks in at 65 to start aggressive conversions.
• State-tax move in motion: planning to relocate from CA / NY / OR (high-tax) to FL / TX / NV (no-tax) in the next 1-2 years. Wait to convert until after the move; the state tax savings on conversion is 5-10% of the converted amount.
• Very near-term medical expense: if you anticipate a major medical bill that will produce a large itemized deduction, that deduction can offset conversion income at a higher effective rate than the gap-year bracket. Coordinate timing.

What to do next

1. Pull your latest pay stub or tax return to estimate your gap-year non-conversion income. The lower this number, the larger your conversion window.
2. Look up your projected SS benefit at FRA at ssa.gov/myaccount and decide on a claim age. The longer you delay, the longer your conversion window stays low-income.
3. Build a 10-year conversion schedule with annual amounts. Target the IRMAA threshold ($103K MAGI single / $206K MFJ) as your ceiling unless you have specific reasons to push past it.
4. Execute conversions in Q4 each year. By October-November, you can size the final conversion precisely without overshooting.
5. Annual review: as SS COLAs and portfolio yields shift, your "other income" baseline moves and your conversion target adjusts.

Key takeaways

• For a $1M traditional 401(k) holder with 10 gap years between retirement and first RMD at 73 (born 1951-1959 under SECURE 2.0 §107), the conversion-target framework is bracket arithmetic: convert up to the top of the bracket you're filling minus your other income, capped by IRMAA.
• The IRMAA threshold at $103K (single) / $206K (MFJ) MAGI is usually the binding constraint, not the income-tax bracket. Most $1M holders cap conversions at IRMAA rather than at the 22% bracket top.
• Filling the 12% bracket is universally correct: $48K-$50K/year of conversion for a single filer at an effective federal rate of 8.7%. The case for filling the 22% bracket is also strong for most $1M+ holders because projected RMD-era marginal rates are usually 22%+.
• Filling the 24% bracket is case-by-case. Worth it when projected RMD-era marginal is 24%+ (high-income retirees with $2M+ balances). Not worth it for moderate-income retirees where 22% is the future marginal.
• The 5-year clock under IRC §408A(d)(2)(B) starts a new period for each conversion. After age 59½, the clock is mostly moot for retirees executing a 10-year ladder — principal can be withdrawn at any time.
• The conversion ladder's lifetime tax savings range from $45K (moderate-income retiree, conversion is primarily about IRMAA and Roth growth) to $300K+ (high-income retiree, conversion arbitrages 8-15 percentage points across 25 years of retirement).