A 60-year-old couple with $1.5 million in a traditional 401(k) faces an unusual math problem: pay roughly $39,200 in voluntary tax in 2026, or leave the money put and face an estimated $100,000 larger tax bill over a longer horizon. For many in that bracket, the answer, according to a new analysis, is to convert.
The conversion amount sits at around $178,000. That figure fills the 22% marginal bracket for married couples filing jointly, which in 2026 runs from $100,800 to $211,400. The standard deduction adds another $32,200, meaning a couple with minimal other income can move funds from a traditional 401(k) into a Roth IRA at a 22% rate, paying about $39,200 from a taxable brokerage account so the full amount enters the Roth.
The trade works because of what happens later. Left in a traditional account, that money grows at a blended 6% return, doubling over 15 years before required minimum distributions begin at 75. Those forced withdrawals stack on top of Social Security benefits, up to 85% of which can become taxable. They also hit Medicare‘s income-related monthly adjustment amount, or IRMAA, adding surcharges that can run several thousand dollars per couple per year.
Those layers push the effective marginal rate to near 40%. Paying 22% today to avoid a 40% effective rate later yields a gap that comfortably exceeds $100,000 over a typical retirement horizon, the analysis says. That estimate does not even count the tax-free growth inside the Roth after conversion.
Timing matters. The five years between retiring at 65 and starting Social Security at 70 give retirees a window of near-total control over taxable income. That window narrows once RMDs and benefits begin. The analyst suggests filling the bracket every year through age 65.
For those still working at 60, the contribution rules have shifted. The 2026 elective deferral limit is $24,500, with an additional $11,250 super catch-up for workers aged 60 to 63. And under SECURE 2.0, anyone who earned more than $150,000 in FICA wages in 2025 must direct that catch-up into a Roth 401(k) anyway.
Interest rates also play a role. The Federal Reserve has held the upper bound at 3.75% since December 10, 2025, after six months of cuts. That stability makes it easier to generate the cash needed for the conversion tax without selling growth assets at an inopportune time.
The analysis underscores how rare such a balance is. The average 401(k) balance for baby boomers is only $267,900, making the $1.5 million scenario an outlier where the strategy pays for itself many times over.
