The Three Years Between Retirement and Medicare Are the Cheapest Tax Years a Couple Will Ever See

Jake FitzGerald

Mon, September 21, 2026 at 6:42 PM GMT+3 5 min read

Quick Read

Retiring at 62 creates a rare 3-year window where a couple can shelter roughly $133,000 of gross income at just 12% before Social Security and RMDs begin.
Converting roughly $93,000 yearly to a Roth for three years moves $280,000 out of a 401(k) at the 12% rate, which helps them avoid the 22% to 24% rates that kick in once RMDs and Social Security stack together in their 70s.
Only age 62 is truly IRMAA-free. At 63 and 64, keeping MAGI under $218,000 is essential to avoid hundreds of extra dollars monthly in Medicare premiums due to the two-year lookback.
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Picture a couple, both 62, who just handed in their notices. Their combined 401(k) balances sit near $1.6 million, they own their house, and Medicare is three birthdays away. Between now and age 65, they have the rarest thing in retirement planning: a window where they control almost every line on their tax return. Ed Slott made the same point in a recent Morningstar interview headlined Don't Waste Your Low-Tax Years in Retirement, and the math behind that warning is worth walking through in dollars.

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Why the Gap Years Are Structurally Cheap

The engine here is the 2026 tax code. A married couple filing jointly gets a standard deduction of $32,200, and the 12% bracket runs up to $100,800 of taxable income. Stack those together and roughly $133,000 of gross income can hit the 1040 while the top marginal rate stays at 12%. No paycheck is coming in. Social Security has not started. Required minimum distributions do not begin until age 73. The line labeled "taxable income" is essentially a dial the couple gets to set.

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That dial has a purpose. Every dollar left inside the traditional 401(k) is a future dollar of ordinary income that will eventually stack on top of Social Security and, later, RMDs. Moving money to a Roth now, at 10% or 12%, sidesteps a 22% or 24% withdrawal in the couple's 70s, plus the Social Security taxation cascade and IRMAA surcharges that come with it.

Filling the 12% Bracket With a Roth Conversion

Assume the couple has $40,000 of dividends, interest, and a small pension. To fill the 12% bracket, they can convert about $93,000 from the 401(k) to a Roth IRA and land near the top of that $100,800 threshold. Federal tax on the conversion runs roughly $11,000, an effective rate near 12%. Repeat that for three years and about $280,000 of pretax money moves to a Roth, where it grows without RMDs and comes out tax-free.

Willing to pay 22%? The 24% bracket does not begin until $211,400 of taxable income for joint filers in 2026. That opens roughly $110,000 more of conversion room per year at a 22% marginal cost, still cheaper than the 24% or 25%-plus effective rates most large 401(k) balances trigger once RMDs, Social Security, and IRMAA all fire at once.

IRMAA Lookback Trap Hiding in Year Two

The Medicare piece is where couples over-convert and get burned. Part B is $202.90 a month in 2026 at the standard premium, but the first IRMAA surcharge kicks in for joint filers with MAGI above $218,000, and premiums climb from there. Because IRMAA uses a two-year lookback, the tax return filed at age 63 sets Part B and Part D premiums at age 65. The return at age 64 sets premiums at age 66.

Only the first gap year, age 62, is truly IRMAA-free. Aggressive conversions belong there. In years two and three, keep MAGI under the $218,000 joint threshold unless the long-term savings clearly outweigh a year or two of surcharges. A $30,000 conversion that pushes MAGI $1 over the line can add hundreds of dollars per person per month in future Part B and Part D premiums.

Three Moves Before the Medicare Card Arrives

Model each gap year separately. Age 62 is the year to convert most aggressively. At ages 63 and 64, cap MAGI just under $218,000 to preserve the standard $202.90 Part B premium at 65 and 66.
Pair conversions with a cash bucket. With the 10-year Treasury near 5%, a short Treasury ladder can fund living expenses so conversion dollars actually leave the pretax account instead of being siphoned off to pay the tax bill.
Respect the new catch-up rule if either spouse still works part-time. For 2026, employees 50 and older who earned more than $150,000 in 2025 must route catch-up contributions to a Roth 401(k), which raises taxable income today but adds tax-free assets that pair well with the conversion plan.

The 2027 Social Security COLA is currently tracking near 3.3%, meaning the eventual benefit check, and the taxable-income problem it creates, keeps growing. The three gap years do not repeat. Used deliberately, they can shift a six-figure slice of the 401(k) into a Roth at a tax rate the couple will never see again (we sized up this exact window, between the last paycheck and the first RMD, in a free Roth guide here: The Roth Window).

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