Roth Conversion Ladder on an $800K Traditional IRA: 5-Year Plan to Shrink RMDs and Dodge IRMAA Surcharges

The setup: $800K Traditional IRA, age 60, and a five-year window most people waste

A Dallas couple, both 60, retired last year. His Traditional IRA holds $800,000. She has $60,000 in a Roth from prior contributions. They have $180,000 in a joint brokerage account generating roughly $12,000/year in qualified dividends. No pension. No Social Security yet — they plan to claim at 70 for maximum delayed retirement credits (+8%/year past full retirement age of 67, per SSA).

Their taxable income right now: $12,000 in dividends. That’s it. The 2026 MFJ standard deduction is $31,500. They’re leaving $19,500 of the standard deduction completely unused — and the entire 10% bracket ($0–$23,850 taxable) and 12% bracket ($23,851–$96,950 taxable) sit empty.

That empty bracket space is free money they’re burning every year they don’t convert.

In 13 years, when he turns 73, he’ll face required minimum distributions under SECURE 2.0 § 107. If the IRA compounds untouched at 5% annual growth, the balance at 73 is roughly $1.5M. His first RMD: $1,503,000 ÷ 26.5 (IRS Pub. 590-B, Table III divisor at age 73) = $56,717. Stack that on top of combined Social Security of ~$72,000/year, and their gross income at 73 is $128,717 — pushing them into the 22% federal bracket with $267 of taxable income above the 12% ceiling.

The conversion ladder fixes this by pulling income forward into the gap years when brackets are low, shrinking the future IRA balance and the RMDs it produces.

Year-by-year conversion model: $100K/year for five years

The target: convert $100,000 per year at ages 60–64. With $12,000 of dividend income, each year’s MAGI lands at $112,000. Taxable income after the $31,500 MFJ standard deduction: $80,500 — well within the 12% bracket ceiling of $96,950.

Tax on each $100K conversion with $12K of other income: MAGI of $112,000, taxable income of $80,500. Federal tax: $23,850 × 10% ($2,385) + $56,650 × 12% ($6,798) = $9,183 on the conversion income, plus ~$362 on the dividend income. Rounding for bracket adjustments and assuming stable dividend income, each year costs roughly $9,545 in total federal tax. Five years: $47,725.

After five years of conversions, the Traditional IRA is at $440,834 and the Roth holds $580,191 — growing tax-free with no future RMDs.

What happens at 73: converted vs. unconverted

The remaining $440,834 Traditional IRA grows at 5% for eight more years (ages 65–72) to roughly $651,400 by age 73. Here’s the side-by-side:

Annual tax savings at 73: ~$3,859. That savings recurs every year — and grows as the unconverted IRA’s RMDs increase with the shrinking divisor. By age 80, the no-conversion RMD climbs above $75,000 (divisor drops to ~19.4), pushing into the 22% bracket and widening the gap further.

Meanwhile, the Roth balance of ~$857,000 generates zero taxable income. It doesn’t inflate MAGI, doesn’t trigger Social Security taxation thresholds (50% taxable above $32K combined income, 85% above $44K for MFJ — unchanged since 1983), and has no RMDs for the original owner under current law.

The IRMAA math: why conversion timing and the two-year lookback matter

Medicare Part B and Part D premiums include Income-Related Monthly Adjustment Amounts (IRMAA) for higher-income beneficiaries. The surcharge is based on your MAGI from two years prior — 2026 income sets 2028 premiums, 2029 income sets 2031 premiums.

The 2026 IRMAA thresholds for MFJ:

At $112,000 MAGI during conversion years, our couple is well under the $206,000 MFJ threshold. No IRMAA exposure from conversions.

The critical nuance: if they turn 65 in 2031, their first Medicare premiums are based on 2029 MAGI (the age-63 conversion year). Since 2029 MAGI is $112,000, they enter Medicare at the base Part B premium of $185/month — not the $259/month first-tier surcharge.

Without conversions, the couple’s MAGI at 73 is $128,717. Still under $206K — but that’s the scenario where nothing else changes. Add a one-time IRA distribution for a home repair, a capital gain from rebalancing, or a surviving spouse filing single (IRMAA single threshold: $103,000), and they’re over the cliff. The conversion ladder builds a permanent buffer by shrinking the IRA that produces the income. For the full IRMAA cliff mechanics and single-filer exposure, see our dedicated piece.

Front-load conversions before Medicare: the sequencing strategy

Not all conversion years are equal. Here’s the priority order:

Ages 60–62 (2026–2028): Maximum conversion room. You’re not on Medicare, so IRMAA is irrelevant. No Social Security income inflating MAGI. These are the years to convert the most aggressively — up to the top of the 12% bracket ($128,450 total income MFJ) or even into the 22% bracket ($238,200 total income MFJ) if the future RMD math justifies the higher current-year tax.

Age 63 (2029): This conversion’s MAGI sets your 2031 Medicare premiums (the year you turn 65 and enroll). Stay under $206,000 MFJ to avoid IRMAA on your first Medicare year. At $100K conversion + $12K dividends = $112K MAGI, you’re clear.

Age 64 (2030): This conversion’s MAGI sets your 2032 premiums. Same threshold applies. If you want to increase the conversion amount in the early years and reduce it here, that’s a valid approach — convert $120K at ages 60–62 (no IRMAA risk), then $80K at ages 63–64 (IRMAA-conscious).

A variable-sized ladder — $120K for three years, $80K for two — converts $520K total instead of $500K. The extra $20K costs roughly $4,400 more in conversion tax (the marginal dollars hit the 22% bracket at $120K conversion) but further reduces the age-73 RMD.

Sizing conversions against the standard deduction and 0% capital-gains bracket

Two bracket-fill targets matter simultaneously:

Target 1: Income tax brackets. The 2026 MFJ standard deduction is $31,500. The 10% bracket covers the first $23,850 of taxable income. The 12% bracket covers $23,851–$96,950. That means up to $128,450 of total income ($31,500 + $96,950) stays within the 10–12% brackets. Every dollar of conversion within this range costs at most 12 cents in federal tax.

Target 2: 0% long-term capital gains bracket. The 2026 MFJ 0% LTCG bracket covers taxable income up to $96,700. If the couple is also harvesting capital gains from their brokerage account (rebalancing, tax-loss harvesting replacements), they need to keep total taxable income — conversion income plus realized gains — below $96,700 to keep those gains at 0% federal. A $100K conversion with $12K dividends produces $80,500 taxable income, leaving roughly $16,200 of room for 0% capital gains in the same year.

The coordination matters. If they convert $100K and also realize $25K of LTCG in the same year, their taxable income is $105,500 — the first $16,200 of capital gains falls in the 0% bracket, and the remaining $8,800 gets taxed at 15%. Missing this coordination costs ~$1,320 in unnecessary capital gains tax.

The 5-year seasoning clock: irrelevant for this couple, but know the rule

Each Roth conversion starts its own five-year clock under IRC § 408A(d)(3)(F). If you withdraw converted principal before five years and before age 59½, you owe a 10% early withdrawal penalty (no income tax — you already paid that at conversion).

For anyone converting at age 60 or later, this rule is a non-issue. You’re already past 59½, so the penalty doesn’t apply regardless of the clock. The 2026 conversion is penalty-free to withdraw immediately.

The separate five-year rule for tax-free earnings is the one to watch: your first Roth account (whether from contributions or conversions) must be at least five years old and you must be 59½+ for earnings to come out tax-free. If this is their first Roth conversion at age 60, earnings become tax-free at age 65 (2031). Since they have $60K in an existing Roth from prior contributions, that clock may already be satisfied — the five-year period runs from the first Roth contribution to any Roth account, not per conversion.

The operational takeaway: if you don’t have any Roth account yet, open one and make even a small contribution in the first year of your conversion plan. That starts the earnings clock running five years earlier than it would from a conversion alone.

Cumulative cost comparison: conversion vs. doing nothing over 20 years

The conversion ladder has a clear upfront cost. The question is whether future savings exceed it. Here’s the 20-year projection from age 60 to 80:

The conversion cost of $47,725 is recovered in approximately 12 years of RMDs (ages 73–85) through bracket savings alone — not counting the tax-free compounding inside the Roth or the IRMAA avoidance. For a couple with median life expectancy into their mid-80s, the ladder pays for itself and then some.

The surviving-spouse trap: why single-filer brackets make conversions even more urgent

Most retirement projections assume MFJ forever. They shouldn’t. When one spouse dies, the survivor files as single. The 2026 single brackets are roughly half the MFJ thresholds:

• 12% bracket ceiling: $48,475 taxable (single) vs. $96,950 (MFJ)
• 22% bracket ceiling: $103,350 taxable (single) vs. $206,700 (MFJ)
• IRMAA single threshold: $103,000 vs. $206,000 (MFJ)

A surviving spouse inherits the deceased spouse’s Traditional IRA. Without conversions, the full $1.5M IRA is now in a single account owned by a single filer. RMDs of $56K+ on a single return, plus their own SS survivor benefit, easily pushes into the 22% bracket and over the $103,000 IRMAA single threshold.

With the conversion ladder: the surviving spouse has a $651K IRA producing a $24,581 RMD. Combined with a ~$36K SS survivor benefit, their MAGI is roughly $60,581. Taxable income after the single standard deduction ($15,750): $44,831. Solidly in the 12% bracket. No IRMAA.

The surviving-spouse scenario is where the Roth conversion ladder’s value is most dramatic — and most underappreciated. Three additional RMD reduction strategies address this dynamic from different angles.

What the conversion ladder does NOT solve

ACA premium subsidies (ages 60–64): If the couple is on an ACA marketplace plan before Medicare, conversion income inflates MAGI and can reduce or eliminate premium subsidies. For a 60-year-old couple in Dallas, the ACA subsidy cliff matters — a $100K conversion could push MAGI above the 400% FPL threshold (roughly $81,760 for a household of two in 2026), though the Inflation Reduction Act’s enhanced premium tax credits (if still in effect) cap premiums at 8.5% of income above that level rather than creating a hard cliff. Model the ACA interaction before setting conversion amounts.

State income tax: Texas has no state income tax, so this Dallas couple pays $0 in state tax on conversions. In a state like California (13.3% top rate) or New York (10.9%), $100K conversions add $5,000–$10,000 in annual state tax. The math still works for most high-balance IRAs, but the payback period extends.

Charitable giving in retirement: If the couple plans significant charitable giving after 73, qualified charitable distributions (QCDs) up to $105,000/year directly from a Traditional IRA may be more tax-efficient than converting and donating from a Roth. QCDs satisfy the RMD without adding to MAGI. Converting first and donating later wastes the conversion tax. The QCD math should be modeled alongside the conversion ladder.

Conversion timing within the year: December is dangerous

The Roth conversion deadline is December 31 of the tax year — not April 15. TCJA eliminated recharacterization for conversions, so there’s no undo button. Two timing considerations:

Early-year conversions capture more growth inside the Roth. Converting in January means 11 additional months of tax-free growth vs. a December conversion. On $100K at 5%, that’s ~$4,600 of growth that occurs tax-free in the Roth instead of tax-deferred in the Traditional.

Late-year conversions let you see your full-year income picture. If the couple receives an unexpected capital gain or income spike mid-year, they can size the December conversion to stay within their target bracket. The trade-off: a December conversion risks processing delays that push it into the next tax year.

The practical answer: convert 70–80% of the target amount in Q1, reserve 20–30% for a Q4 “top-off” conversion that precisely fills the remaining bracket space. This captures most of the growth advantage while preserving flexibility.

The bottom line

The five-year window between retirement and Social Security/RMDs is a bracket-arbitrage opportunity that doesn’t come back. For a couple with $800K in a Traditional IRA, converting $100K/year at the 10–12% brackets costs ~$47,725 in upfront federal tax. In return, they cut their age-73 RMD from $56,717 to $24,581, stay in the 12% bracket instead of touching 22%, avoid IRMAA exposure as a surviving single filer, and build a $857K+ Roth balance that generates zero taxable income for life.

The three decisions that determine whether this works: (1) start converting in the first year of the gap — every year of delay is a year of lost low-bracket space, (2) size each conversion to fill the 12% bracket but stay below the IRMAA threshold for the years that are within the two-year lookback of Medicare enrollment, and (3) coordinate with capital gains harvesting and ACA subsidies in the same tax year. The Roth conversion ladder strategy guide covers the mechanics in detail.