A $1 Million 401(k) In Retirement Can Still Cost You Six Figures Without These 5 Moves

A $1 million 401(k) balance places savers ahead of 95% of Americans but exposes them to multiple tax and administrative traps that can cost six figures over a 30-year retirement. Retirement typically lowers taxable income, creating a window before Required Minimum Distributions begin at age 73 under SECURE 2.0 for Roth conversions from traditional 401(k)s to Roth IRAs while staying in lower tax brackets. A $1 million balance produces roughly $40,000 in RMDs at 73, which combined with Social Security and pensions causes uncontrolled bracket creep. Medicare IRMAA thresholds use a two-year lookback and can add $2,000–$5,000 annually. Beneficiary forms override wills and non-spouse inherited IRAs generally must be withdrawn within ten years.

"Retirement drops your income, creating a narrow window before Required Minimum Distributions (RMDs) kick in at age 73 under the SECURE 2.0 Act. During those years, you can convert chunks of your traditional 401(k) to a Roth IRA while staying in lower tax brackets. Married filers converting $190,000 annually stay in the 22% bracket. Wait until RMDs force distributions, and you could land in the 24% or 32% bracket on income you never chose to take."

"Medicare premiums are not flat. Income exceeding $106,000 for individuals or $212,000 filing jointly in 2026 triggers Income-Related Monthly Adjustment Amounts, adding $2,000 to $5,000 annually to your costs. IRMAA looks back two years, so a large Roth conversion or capital gain in your early 60s can trigger surcharges at 65. Map your income for the two years before Medicare eligibility and avoid crossing thresholds unnecessarily."

Read at 24/7 Wall St.