Here Is Why I Would Tell a 71-Year-Old With $4 Million to Spend Down the Traditional IRA First

Quick Read

• A 71-year-old with $2.5M in a traditional IRA faces a $104,000 RMD at 73 that triggers Medicare surcharges costing $65,000-$80,000 over her lifetime.

• Voluntarily pulling $80,000 yearly from the traditional IRA now and converting $150,000 to Roth shrinks her first RMD and keeps her below the IRMAA cliff.

• Current yields on Treasuries near 4-5% let her fund withdrawals without selling equities, while inflation erodes the value of tax-deferred money sitting idle.

• Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here.

The retiree we are modeling is single, 71, and sitting on $4 million split across a $2.5 million traditional IRA, an $800,000 Roth IRA, and a $700,000 taxable brokerage account. Required minimum distributions hit in two years, and the standard withdrawal sequence, taxable assets first, traditional IRA second, Roth IRA last, is about to become far more expensive than it appears on paper.

That conventional approach can allow the traditional IRA to keep compounding until future RMDs become large enough to trigger higher tax brackets, larger Medicare IRMAA surcharges, and increased taxation of Social Security income. Here is why I would tell her to begin drawing down the traditional IRA now instead of waiting for the IRS to force the issue later.

Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here.

The RMD problem coming into focus at 73

If she leaves the traditional IRA alone and lets it compound at a modest 5% for two years, the balance grows to roughly $2.76 million. Divide that by the IRS Uniform Lifetime Table factor of 26.5, and her first RMD lands at $104,151. Add $42,000 in Social Security and her AGI clears $146,000.

That number is the trap. It pushes her into the 22% to 24% bracket and into IRMAA tier 2 for single filers (an estimated $133,000 to $167,000 band for 2026), which surcharges her Medicare Part B and Part D premiums for the rest of her life on a rolling two-year lookback. Those surcharges do not show up on a brokerage statement, which is why retirees miss them.

Why front-loading the traditional IRA at 71 and 72 works