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A 65 year old single retiree posted a familiar question on a Bogleheads thread last month: \u201cI have $1.6 million in a traditional 401(k) and $30,000 in Social Security. Every article tells me to do Roth conversions to fill the 12% bracket. Nobody tells me the actual dollar amount.\u201d The honest answer for that exact profile is $43,000 a year, every year, from age 65 through 72. Here is the line by line math that gets there.<\/p>\n
Under the 2026 rules, a single filer pays 12% on taxable income up to $50,400. Anything above that jumps to 22%. The deductions stack as follows: the regular standard deduction of $16,100, the age 65 add on of $2,050, and the new senior bonus deduction of $6,000 created by the One Big Beautiful Bill<\/a>, available in full because this retiree\u2019s MAGI sits well under the $75,000 phase out for singles. Total deductions: $24,150.<\/p>\n That means the ceiling on gross income before tipping into the 22% bracket is $50,400 plus $24,150, or $74,550. Social Security eats some of that ceiling. With $30,000 in benefits and provisional income well past the upper threshold, 85% becomes taxable. That is $25,500 of ordinary income before a single dollar is converted.<\/p>\n Why $43,000 Is the Right Conversion Size<\/p>\n Subtract the taxable Social Security from the bracket ceiling: $74,550 minus $25,500 leaves roughly $49,000 of headroom for a Roth conversion. The temptation is to convert the full amount. Resist it. A taxable brokerage account throws off dividends and the occasional capital gain distribution in December that the retiree cannot forecast in March. Bond interest, a Treasury maturing, a mutual fund kicking out a surprise gain: any of these can push the last dollar of the conversion into the 22% bracket retroactively.<\/p>\n Converting $43,000 leaves a buffer of roughly $6,000 for that noise. The federal tax on the conversion itself is $43,000 times 12%, or $5,160 a year. Run that for eight years from age 65 through 72 (the last year before RMDs begin at 73 for this birth cohort) and the retiree has shifted $344,000 out of the traditional 401(k) at a known, locked in rate, for a cumulative tax cost near $41,000.<\/p>\n The Bracket Arbitrage Nobody Writes Down<\/p>\n Left alone, that same $344,000 compounds inside the 401(k). At a 6% return over eight years, the untouched balance would grow to roughly $548,000 by age 73, then start coming out as required minimum distributions<\/a> on top of Social Security and any other income. At that point, the marginal rate on the top slice of RMDs is almost certainly 22% or 24%, well above today\u2019s 12%. The arbitrage is paying 12% now to avoid 22% to 24% later on the same dollars plus all their growth.<\/p>\n Pushing the conversion higher destroys the trade. A $70,000 conversion would put roughly $20,000 into the 22% bracket. That marginal slice would be taxed at a rate identical to the future RMD rate this strategy is designed to dodge. There is no arbitrage left.<\/p>\n The IRMAA Window Stays Wide Open<\/p>\n