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The $1.5 Million 401(k) Tax Trap: How Bracket Smoothing Saves Retirees From 40% Effective Rates
Key takeaways
- Married couples can convert roughly $133,000 annually from pretax 401(k) to Roth at a 12% rate, paying about 9% effective tax before hitting the 22% bracket.
- Always pay Roth conversion taxes from a taxable brokerage account, because withholding from the converted balance shrinks the Roth and can trigger a 10% penalty if you are under age 59½.
- SmartAsset s free tool can match you with a financial advisor in minutes to help you answer that today.
The $1.5 Million 401(k) Tax Trap: How Bracket Smoothing Saves Retirees From 40% Effective Rates Marc Guberti Sun, June 14, 2026 at 10:24 PM GMT+7 5 min read Quick Read Retirees with large traditional 401(k)s can face effective marginal rates near 40% when RMDs, Social Security taxation, and Medicare IRMAA surcharges stack simultaneously at age 73.
Married couples can convert roughly $133,000 annually from pretax 401(k) to Roth at a 12% rate, paying about 9% effective tax before hitting the 22% bracket.
Always pay Roth conversion taxes from a taxable brokerage account, because withholding from the converted balance shrinks the Roth and can trigger a 10% penalty if you are under age 59½.
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