A $2.3 Million 401(k) at 76 Produces a $97,000 RMD That Pushes a Couple Out of the 22% Bracket for Good

A retired couple, both 76 years old, discovered that a $2.3 million traditional 401(k) they rolled into an IRA at retirement would force them into a higher tax bracket. The required minimum distribution (RMD) due this year amounted to $97,000, which along with Social Security, pension, and investment income, pushed their adjusted gross income (AGI) near $228,000.

This placed them in the 24% tax bracket, and the additional income triggered a $2,300 increase in their Medicare Part B and Part D premiums due to the Medicare IRMAA threshold. To avoid this situation, the couple could explore options such as qualified charitable distributions, partial Roth conversions, and swapping taxable bonds for municipal bonds, which could reduce their AGI and potentially lower their tax liability.