Playbook · taxes · retirement

Spend in order, convert on purpose

Free primers: Roth conversions, RMDs (73 vs 75), IRMAA two-year lookback, 2026 capital-gains bands. Calculators: Roth conversion (tax + IRMAA), capital gains (0/15/20 + NIIT), RMD estimator, IRMAA MAGI room. Paid steps assume you already know “taxable first, Roth last” is a starting slogan, and you want a year-by-year MAGI file, not a flowchart poster.

Do this in order

  1. Write four numbers before you pick a bucket. (1) This year’s cash spend after pensions you already have. (2) Taxable brokerage: cost basis vs unrealized long-term gain, lot by lot — specific identification, not FIFO. (3) Traditional IRA / 401(k) balance. (4) Roth IRA / Roth 401(k) balance. Add the HYSA sleeve you will not raid for a conversion tax. If you cannot name the four, you are guessing. Asset-location is a different file: where the funds sit. This file is the order you take dollars out.
  2. Write the calendar: Medicare, Social Security, RMD age. Born 1951–1959: RMDs start at 73. Born 1960 or later: 75 (SECURE 2.0; IRS Pub. 590-B). First RMD can wait until April 1 of the following year — that is a two-RMD calendar year, which is how people walk into IRMAA by accident. Medicare is 65. Social Security is a claiming choice, not a tax strategy — the household file is couples claiming. Gap years are the seasons between a paycheck stopping and those three clocks. Count them. Nine empty years is not the same file as two.
  3. Spend cash above the sleeve. Do not empty the emergency fund because a blog said “taxable first.” Cash that is the next 3–12 months of spend is not a tax lot. “Taxable first” means brokerage lots, not the HYSA that keeps a water heater off a 24% card. Park-the-cash mechanics stay in I-bonds vs T-bills vs HYSA. If the sleeve would go to $0 to harvest a 0% gain, you wanted the gain next year.
  4. Harvest long-term lots at 0% while ordinary income is still low. 2026 0% long-term band (Rev. Proc. 2025-32): taxable income up to $49,450 single / $98,900 MFJ / $66,200 HOH. Ordinary income fills first; LTCG stacks on top. Specific-ID the lots. Qualified dividends sit in the same 0/15/20 stack. 15% LTCG runs to $545,500 single / $613,700 MFJ; 20% after that. NIIT 3.8% still starts at MAGI $200,000 single / $250,000 MFJ (not indexed). Short-term lots are ordinary income — do not “harvest” a 5-month lot into the 12% fill. Primer: short vs long. Numbers: capital-gains calculator. Losses are the harvest file, not this one.
  5. Fill remaining 12% (sometimes 22%) with traditional withdrawals for spend, or Roth conversions. 2026 ordinary: 12% ends at taxable $50,400 single / $100,800 MFJ; 22% ends at $105,700 / $211,400; standard deduction $16,100 / $32,200 / $24,150 HOH (Rev. Proc. 2025-32 / IR-2025-103). Age-65 extra standard deduction is $2,050 unmarried / $1,650 per spouse — separate from any temporary senior deduction. Pay conversion tax from taxable cash, not from the IRA. Converting and withholding from the IRA is how a $91k conversion becomes a smaller Roth and a MAGI spike. Primer: who conversions actually help. Filling 12% on purpose beats minimizing this year’s tax to $0 and exploding at RMD age.
  6. IRMAA is a two-year MAGI cliff, not a bracket. 2026 Part B standard premium is $202.90/mo. First surcharge (2024 MAGI above $109,000 single / $218,000 MFJ): Part B $284.10 + Part D $14.50 — $95.70/mo extra per person, $2,297/yr for a couple (CMS Nov 14, 2025 fact sheet; SSA POMS HI 01101.020). Next cliff ($137k / $274k) is $405.80 Part B + $37.50 Part D. Cross by a dollar, pay the tier all year. 2026 MAGI sets 2028 premiums. Run the year through IRMAA MAGI room before you convert. Work-stoppage can justify SSA-44; a stock sale cannot. Sequence: IRMAA planning — do not rebuild it here.
  7. Before 65, ACA MAGI is the subsidy. Roth and basis can keep MAGI down; traditional cannot. Premium tax credits use MAGI this year, not two years from now. Filling the 12% bracket with conversions in an ACA year can cost more in lost PTC than it saves in future RMDs. That year, spend from Roth contributions / converted basis (after the conversion 5-year clock if you are under 59½) or from brokerage basis, and convert less. The slogan “Roth last” is how people light a subsidy. After Medicare starts, this cliff dies and IRMAA takes its place — same MAGI, different bill.
  8. Convert before Social Security when the calendar allows. Provisional income = AGI + tax-exempt interest + 50% of Social Security. Thresholds are not indexed: 50% of benefits taxable above $25,000 single / $32,000 MFJ; 85% above $34,000 / $44,000 (IRC 86). Traditional withdrawals and conversions sit in AGI and pull more of the benefit into the 85% band — the “tax torpedo.” A gap-year conversion that never meets a benefit is often cheaper than the same conversion at 70 sitting next to a delayed credit. Claiming itself is still the household file: delay the high earner; do not claim early to “fill a bracket.”
  9. Treat RMDs as a design constraint, not a December surprise. Formula: prior year-end balance ÷ Uniform Lifetime Table factor (Treas. Reg. §1.401(a)(9)-9). Age 73 factor 26.5; age 75 24.6. Worked: $800,000 traditional, 7% for 11 years to age 75 → $1,683,882 ÷ 24.6 ≈ $68,450 that must come out, ordinary income, whether you needed it or not. Missed-RMD penalty is 25%, 10% if corrected in the window (SECURE 2.0). Roth IRAs have no lifetime RMD for the original owner. Run today’s balance through the RMD calculator. The paid RMD sequence (QCDs, inherited 10-year, April 1 trap) is ira-rmd-playbook — cross-link, do not copy it.
  10. If you give anyway and you are 70½, QCD before you write a check from the brokerage. 2026 QCD cap is $111,000 per IRA owner (IRS Notice 2025-67; $108,000 was 2025). Trustee-to-charity, not a check you deposit first. A QCD can satisfy that year’s RMD and does not land in AGI the way a normal withdrawal does — which is why it is an IRMAA tool. You cannot also deduct it on Schedule A. One-time split-interest election is $55,000 inside the annual cap, not on top. Deadline is December 31, no extension. If you do not give, skip this step; do not invent a charity to dodge MAGI.
  11. “Roth last” is the default except three years. Leave most Roth for (a) a year you must hold MAGI down — IRMAA, ACA, NIIT, or the 0% LTCG band you are trying to keep, (b) late years when RMDs plus Social Security already fill 22%/24%, (c) heirs under the 10-year inherited-IRA rule, who would rather inherit Roth. HSA after 65 is a medical Roth: qualified medical is tax-free; non-medical is ordinary income like a traditional IRA. Spending Roth contributions is not a MAGI event. Spending a current-year conversion under 59½ can be a 10% problem — each conversion has its own 5-year clock. After 59½ the conversion principal is clean; earnings still need the account to be 5 years old.
  12. Hard-stop list: converting on a credit card; withholding the conversion tax from the IRA; dumping $250k into Roth in one year to “get it over with” and lighting IRMAA at $274k MFJ ($5,770/yr extra Part B+D for a couple at the 2026 second cliff); taking Roth to drive MAGI to $0 and then exploding at the first RMD; FIFO lots when specific-ID would have been 0%; treating the Sep 2026 0% band as a 2027 number; missing the Dec 31 RMD/QCD; delaying the first RMD to April 1 without counting the double year; claiming Social Security early so you can “afford” a conversion; skipping the 401(k) match in a still-working year to fund a conversion (match first — order of operations). If the MAGI tool says you are $2,000 under a cliff, you wanted a smaller conversion, not a bigger slogan.

One-page decision

Sleeve stays. Taxable lots at 0% while ordinary is low. Fill leftover 12% with traditional-for-spend or conversions paid from cash. Run MAGI through the IRMAA calculator every conversion year — 2026 MAGI is 2028 Part B. ACA years: convert less, spend Roth/basis. Convert before Social Security when you can. Grow-forward the traditional pile in the RMD tool so age 73/75 is a number, not a feeling. QCD only if you give. Roth last except MAGI-control years, late RMD years, and heirs. Nobody is required to convert; nobody is required to leave a $1.7M traditional IRA for a $68k RMD.

Worked example (educational, not advice): MFJ, both 64, $80,000 spend, no Social Security yet, 2026. Harvest $40,000 LTCG + $40,000 basis from brokerage (spend). Convert $91,100 traditional → Roth. Ordinary taxable $58,900 after the $32,200 standard deduction; stacked with the gain = $98,900 (exactly the 0% LTCG cap). Federal tax on the conversion year ≈ $6,572 (10% of $24,800 + 12% of $34,100); LTCG at 0%. MAGI ≈ $131,100 — under the 2026 IRMAA first cliff of $218,000 MFJ. Same $80k from the IRA instead: tax ≈ $5,240, but the $40k 0% lot sits unused and the traditional pile is untouched. Leave $800,000 traditional alone at 7% to age 75: RMD ≈ $68,450 (factor 24.6).

Related: Roth conversions · conversion calculator · RMD primer · IRMAA primer · RMD calculator · IRMAA MAGI room · RMD playbook · IRMAA planning · SS claiming