She Retired at 64 With $380,000 in a 401(k) and No Income for Nine Years. She Never Converted a Dollar. Her First RMD Was Taxed at 22%.

She Retired at 64 With $380,000 in a 401(k) and No Income for Nine Years. She Never Converted a Dollar. Her First RMD Was Taxed at 22%.

David Beren

Sat, August 29, 2026 at 11:41 PM GMT+3 5 min read

Quick Read

• Nine gap years before RMDs began at 73 gave her 12% bracket capacity that expired permanently each year she didn't convert.

• Her $380,000 grew to $642,000 at 6% returns; stacked against taxable Social Security, it pushed her first RMD squarely into the 22% bracket.

• Annual partial Roth conversions sized to fill the 12% bracket each gap year would have permanently shrunk the balance driving future RMD obligations.

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A retiree who leaves work at 64 with a $380,000 401(k) balance and no earned income for the next nine years enters what planners call the gap years: the stretch between the last paycheck and the required beginning date when required minimum distributions (RMDs) start. A required minimum distribution is the amount the IRS forces out of a pre-tax retirement account each year once that date is reached. In the scenario laid out here, she did nothing during those years. She never converted a dollar to a Roth. When RMDs finally began, her first one was taxed at 22%. That outcome was avoidable, and the unused years carried a measurable cost.

Timeline: A Nine-Year Window That Was Legally Available

Under SECURE 2.0, the required beginning age depends on birth year. The required beginning age is 73 for individuals born between 1951 and 1959, and 75 for those born in 1960 or later. A retiree who left work at 64 and took her first RMD nine years later reached her required beginning date at 73, which places her in the pre-1960 cohort. For someone born in 1960 or later, the same retirement age would have opened an eleven-year window instead of nine. The gap years are long, and they are among the most flexible tax years a retiree will occupy.

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What Low-Income Gap Years Actually Look Like on a Tax Return

During the nine years between 64 and 73, she had no wages, no pension, and had not yet claimed Social Security. Her taxable income each year was close to zero. For 2026, the IRS set the single standard deduction at $16,100, and the 22% bracket begins above $50,400. A single filer with no other income can recognize a meaningful amount of taxable income each year and still stay within the lower brackets. That capacity is the entire opportunity of the gap years.

Conversion Capacity Does Not Carry Forward

Every year she did not convert, that 12% bracket space expired forever. Meanwhile, her untouched $380,000 balance compounded. At an average 6% annual return over those nine years, the account swelled to roughly $642,000 by age 73. When her required beginning date arrived, the IRS Uniform Lifetime Table (divisor of 26.5) mandated a first-year RMD of about $24,200. Stacked on top of the maximum Social Security benefit she began collecting at 70 (where 85% is taxable), that mandatory distribution pushed her taxable income past the 12% ceiling ($50,400), ensuring the top dollars of her first RMD were taxed at 22%.

What a Conversion Plan Would Have Done

The standard playbook for someone in her position is annual partial Roth conversions sized to the top of a chosen bracket. A conversion moves money from a traditional 401(k) or IRA into a Roth, triggers ordinary income tax on the converted amount, and then lets that money grow and be withdrawn tax-free. Filling the 12% bracket each year for nine years would have shifted a large share of the pre-tax balance into a Roth at 12%, permanently reducing the balance that RMDs are later calculated on (those low-tax years between the last paycheck and the first RMD are the whole subject of our free Roth Window guide). Two operational details matter. Pay the tax on each conversion from taxable savings rather than from the converted amount, so the full converted dollar keeps compounding inside the Roth. And conversions should be coordinated with the Social Security claiming decision, because once Social Security begins, more of every conversion dollar gets taxed, and more of the Social Security itself becomes taxable.

Broader Context

The 10-year Treasury yield was 4.67% on August 27, 2026, and the 2027 Social Security COLA is tracking toward 3.1%. Both figures matter because a retiree relying on Social Security plus mandatory withdrawals will see the taxable share of income rise mechanically as balances compound and benefits adjust.

What the Case Actually Shows

The nine-year window was the cheapest tax environment she would ever occupy. Leaving it untouched concentrated the tax bill into the years when she had the least flexibility, on a balance that had grown at a rate set by the interaction of RMDs and Social Security rather than by anything she chose.

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If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.

Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)

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