A 60-Year-Old With $500,000 in a 401(k) and No Paycheck Can Convert About $66,000 a Year Without Leaving the 12% Bracket. Thirteen Years of That Moves Most of the Account Out at 12%. Wait for 73 and the IRS Picks the Amount, the Year, and the Rate – 24/7 Wall St.
Between your last paycheck and the IRS's first mandatory withdrawal, a narrow tax window opens that most retirees never notice until it closes. How you handle those years determines whether you or the government picks the rate on hundreds of…
Life After Work desk. Editor: David Beren.
Read More: Avoid these 13 retirement mistakes before they derail your future (sponsor)
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
If you’re thinking about retirement taxes, there is a specific window worth understanding: the years between your final paycheck and the start of required minimum distributions (RMDs). During those years, someone living on savings and holding a traditional 401(k) can have very little taxable income. Under the 2026 federal tax schedule, a single 60-year-old with $500,000 in a traditional 401(k) and no wages can convert or withdraw about $66,500 a year. None of that is taxed at more than 12%.
For tax year 2026, single filers have a standard deduction of $16,100. The 12% bracket for single filers covers taxable income from $12,400–$50,400. Adding the deduction to the top of the bracket gives $66,500 of gross income, which is the most that can be taxed at 12% or less.
Federal tax on that amount is $5,800, or about 8.7% of the converted amount. The blended rate is lower than 12% because the deduction portion is taxed at zero and the first layer of taxable income is taxed at 10%. Married couples filing jointly get a 2026 standard deduction of $32,200 and a 12% bracket that runs to $100,800, so a couple has about twice the room.
Age also matters. IRS guidance says distributions taken after age 59½ are not subject to the 10% additional tax, so a 60-year-old pays only ordinary income tax on each converted dollar.
A $500,000 balance is well above what most savers have. Fidelity puts the average 401(k) balance for savers aged 60 to 64 at $246,500. Across all ages in Vanguard’s data, the average is $148,153, and the median is $38,176. The reality is that a handful of very large accounts pull up the average, while the median is the midpoint balance, closer to what a typical participant holds.
The size of the balance is what makes this planning question matter. A small account leads to smaller required withdrawals later. A larger one produces withdrawals big enough to push other income into higher brackets.
Considering only ages 60 through 72 gives 13 tax years, converting at the full rate every year would total $864,500, which is more than the starting balance. Depending on investment returns, the account could convert fully before the window closes, but most households will not run at the full rate every year because Social Security takes up bracket space once benefits begin.
The Social Security Administration estimates the average retired worker benefit at $2,170 a month after the 2027 cost-of-living adjustment, or $26,040 a year. Under 26 U.S.C. § 86(a)(2), up to 85% of benefits can count as income. At that level, $22,134 would be taxable, leaving about $44,366 of room for conversions inside the 12% bracket.
Those figures exclude interest, dividends, and pension income, and each reduces the space further; bracket thresholds also adjust for inflation each year, so the exact room changes from year to year.
The required beginning date is April 1 of the year after the account owner reaches the “applicable age.” Under 26 U.S.C. § 401(a)(9)(C)(v), that age is 73 for anyone turning 73 before January 1, 2033. It is 75 for those who reach 74 after December 31, 2032. Anyone aged 60 in 2026 falls into the second group, so current law gives that person two more years before RMDs start.
Once RMDs start, the annual amount comes from the prior year-end balance and the IRS Uniform Lifetime table, so the account owner no longer picks the amount. A missed RMD triggers a 25% excise tax, which drops to 10% if the shortfall is fixed within the correction window. IRS guidance also says that taking more than the minimum in one year does not count toward future years’ requirements.
The main comparison is the tax rate you pay on a conversion today versus the rate you expect on forced withdrawals later. Other factors include whether you can pay the tax on each conversion from money held outside the account, and the five-year holding rules that apply to Roth accounts. The size of future Social Security checks also matters. Benefits rise with each annual inflation adjustment, such as the 3.6% increase for 2027, and each increase uses up a little more of the 12% bracket in the years after benefits begin.
Contact [email protected] for any questions or corrections.
David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
Most retirees with a traditional IRA let their lowest-tax years quietly expire, then face a forced withdrawal at 73 with no say in the timing or the bill. The window between the last paycheck…
Between ages 62 and 73, most retirees pass through an unusually low-tax stretch of life that they will never see again. Wages have stopped. Social Security can be delayed. Required minimum distributions from traditional…
Two couples retire at 63 with identical IRA balances, but one small decision made during the quiet years before 73 sends their tax bills in completely opposite directions when the IRS finally forces them…
Most retirees never consciously decide to skip a Roth conversion during their gap years, but the IRS treats that silence as a choice with a price tag. The math on a single missed year…
The years between retirement and the first required minimum distribution are the lowest-tax window most couples will ever see, and most of them spend it doing nothing. Here is what that choice actually costs…
When a parent spends decades building a 401(k) at a low tax rate, the real bill can arrive on the child who inherits it, and the gap between what the parent could have paid…
The years between retirement and required withdrawals hand most savers the lowest tax rates they will ever see again, yet the majority let that window close without acting. Here is what that silence actually…
Retiring at 62 with a traditional IRA and no income sounds like the worst time to owe the IRS anything, but the empty tax brackets create a narrow window where converting costs almost nothing…
Most couples near retirement sit on a growing tax bill without realizing the window to shrink it quietly closes in 2028. The math behind one overlooked strategy reveals just how wide that gap can…
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them. © 2026 24/7 Wall St.
source
This article was autogenerated from a news feed from CDO TIMES selected high quality news and research sources. There was no editorial review conducted beyond that by CDO TIMES staff. Need help with any of the topics in our articles? Schedule your free CDO TIMES Tech Navigator call today to stay ahead of the curve and gain insider advantages to propel your business!
Life After Work desk. Editor: David Beren.
Read More: Avoid these 13 retirement mistakes before they derail your future (sponsor)
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
If you’re thinking about retirement taxes, there is a specific window worth understanding: the years between your final paycheck and the start of required minimum distributions (RMDs). During those years, someone living on savings and holding a traditional 401(k) can have very little taxable income. Under the 2026 federal tax schedule, a single 60-year-old with $500,000 in a traditional 401(k) and no wages can convert or withdraw about $66,500 a year. None of that is taxed at more than 12%.
For tax year 2026, single filers have a standard deduction of $16,100. The 12% bracket for single filers covers taxable income from $12,400–$50,400. Adding the deduction to the top of the bracket gives $66,500 of gross income, which is the most that can be taxed at 12% or less.
Federal tax on that amount is $5,800, or about 8.7% of the converted amount. The blended rate is lower than 12% because the deduction portion is taxed at zero and the first layer of taxable income is taxed at 10%. Married couples filing jointly get a 2026 standard deduction of $32,200 and a 12% bracket that runs to $100,800, so a couple has about twice the room.
Age also matters. IRS guidance says distributions taken after age 59½ are not subject to the 10% additional tax, so a 60-year-old pays only ordinary income tax on each converted dollar.
A $500,000 balance is well above what most savers have. Fidelity puts the average 401(k) balance for savers aged 60 to 64 at $246,500. Across all ages in Vanguard’s data, the average is $148,153, and the median is $38,176. The reality is that a handful of very large accounts pull up the average, while the median is the midpoint balance, closer to what a typical participant holds.
The size of the balance is what makes this planning question matter. A small account leads to smaller required withdrawals later. A larger one produces withdrawals big enough to push other income into higher brackets.
Considering only ages 60 through 72 gives 13 tax years, converting at the full rate every year would total $864,500, which is more than the starting balance. Depending on investment returns, the account could convert fully before the window closes, but most households will not run at the full rate every year because Social Security takes up bracket space once benefits begin.
The Social Security Administration estimates the average retired worker benefit at $2,170 a month after the 2027 cost-of-living adjustment, or $26,040 a year. Under 26 U.S.C. § 86(a)(2), up to 85% of benefits can count as income. At that level, $22,134 would be taxable, leaving about $44,366 of room for conversions inside the 12% bracket.
Those figures exclude interest, dividends, and pension income, and each reduces the space further; bracket thresholds also adjust for inflation each year, so the exact room changes from year to year.
The required beginning date is April 1 of the year after the account owner reaches the “applicable age.” Under 26 U.S.C. § 401(a)(9)(C)(v), that age is 73 for anyone turning 73 before January 1, 2033. It is 75 for those who reach 74 after December 31, 2032. Anyone aged 60 in 2026 falls into the second group, so current law gives that person two more years before RMDs start.
Once RMDs start, the annual amount comes from the prior year-end balance and the IRS Uniform Lifetime table, so the account owner no longer picks the amount. A missed RMD triggers a 25% excise tax, which drops to 10% if the shortfall is fixed within the correction window. IRS guidance also says that taking more than the minimum in one year does not count toward future years’ requirements.
The main comparison is the tax rate you pay on a conversion today versus the rate you expect on forced withdrawals later. Other factors include whether you can pay the tax on each conversion from money held outside the account, and the five-year holding rules that apply to Roth accounts. The size of future Social Security checks also matters. Benefits rise with each annual inflation adjustment, such as the 3.6% increase for 2027, and each increase uses up a little more of the 12% bracket in the years after benefits begin.
Contact [email protected] for any questions or corrections.
David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
Most retirees with a traditional IRA let their lowest-tax years quietly expire, then face a forced withdrawal at 73 with no say in the timing or the bill. The window between the last paycheck…
Between ages 62 and 73, most retirees pass through an unusually low-tax stretch of life that they will never see again. Wages have stopped. Social Security can be delayed. Required minimum distributions from traditional…
Two couples retire at 63 with identical IRA balances, but one small decision made during the quiet years before 73 sends their tax bills in completely opposite directions when the IRS finally forces them…
Most retirees never consciously decide to skip a Roth conversion during their gap years, but the IRS treats that silence as a choice with a price tag. The math on a single missed year…
The years between retirement and the first required minimum distribution are the lowest-tax window most couples will ever see, and most of them spend it doing nothing. Here is what that choice actually costs…
When a parent spends decades building a 401(k) at a low tax rate, the real bill can arrive on the child who inherits it, and the gap between what the parent could have paid…
The years between retirement and required withdrawals hand most savers the lowest tax rates they will ever see again, yet the majority let that window close without acting. Here is what that silence actually…
Retiring at 62 with a traditional IRA and no income sounds like the worst time to owe the IRS anything, but the empty tax brackets create a narrow window where converting costs almost nothing…
Most couples near retirement sit on a growing tax bill without realizing the window to shrink it quietly closes in 2028. The math behind one overlooked strategy reveals just how wide that gap can…
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them. © 2026 24/7 Wall St.
source
This article was autogenerated from a news feed from CDO TIMES selected high quality news and research sources. There was no editorial review conducted beyond that by CDO TIMES staff. Need help with any of the topics in our articles? Schedule your free CDO TIMES Tech Navigator call today to stay ahead of the curve and gain insider advantages to propel your business!
