Retirement Planning for High-Income Earners: Tax Strategies and IRMAA Avoidance

If you're earning $200,000+ and have accumulated $2-5 million across retirement accounts, congratulations — you've built substantial wealth. But high income creates high-income problems in retirement: massive RMDs that push you into the top tax brackets, IRMAA surcharges that can add $10,000+/year to Medicare premiums, and a tax-deferred time bomb that grows larger every year you delay addressing it.

The High-Income Retirement Problem

Years of maxing out 401(k) contributions ($23,500/year in 2026, plus $7,500 catch-up if 50+) builds an impressive balance. But every dollar in that account will be taxed as ordinary income when withdrawn — and the IRS will force withdrawals starting at age 73.

The RMD Time Bomb

A $2 million traditional IRA at age 73 generates an RMD of approximately $75,000 in year one. By age 80, the RMD could be $100,000+. Add Social Security ($40,000-$50,000 for a high earner) and you're looking at $150,000+ in taxable income — firmly in the 22% or 24% bracket, with 85% of Social Security taxed.

By age 85, if the account has continued growing, RMDs can exceed $120,000-$150,000 — income you're required to take whether you need it or not.

The IRMAA Hit

IRMAA surcharges are income-based Medicare premium increases that kick in at relatively modest thresholds. For 2026, if your modified AGI exceeds approximately $106,000 (single) or $212,000 (married), you'll pay $1,000-$5,000+ per year extra in Medicare Part B and Part D premiums. For high-income retirees with large RMDs, IRMAA can add $5,000-$12,000/year in pure overhead.

Strategy 1: Aggressive Roth Conversions

The single most impactful strategy for high-income retirees is Roth conversions during the gap between retirement and RMDs.

The Conversion Window

If you retire at 62 and RMDs start at 73, you have an 11-year window where your taxable income may be significantly lower than both your working years and your future RMD years. This is the ideal time to convert traditional IRA money to Roth:

• Fill up the 22% bracket: For a married couple, convert enough to reach the top of the 22% bracket (~$190,750 in 2026). This is dramatically cheaper than paying 24-32% on RMDs later.
• Watch IRMAA thresholds: Balance conversion amounts against IRMAA brackets. Sometimes it's worth paying a small IRMAA surcharge if the conversion saves more in future taxes.
• Convert annually: Don't try to convert everything in one year. Spread conversions across the window to stay in lower brackets each year.

The Math on Conversions

Example: Married couple, both 63, with $2.5M in traditional IRA and $500K in Roth. No other income except $30K from a taxable brokerage.

• Without conversions: At 73, combined RMDs of ~$94,000 + Social Security of $60,000 = $154,000 taxable income. Firmly in 22% bracket, 85% SS taxed, IRMAA tier 1.
• With conversions ($160K/year for 10 years): At 73, traditional IRA is ~$1.1M (vs. $3.5M without conversions), Roth is ~$2.2M. RMDs are ~$41,000. Total taxable: $101,000. Lower bracket, less SS taxation, no IRMAA.
• Estimated lifetime tax savings: $180,000-$250,000

Strategy 2: Tax Bracket Management

High-income retirees need to think about tax brackets year by year, not just in aggregate:

• Fill the 12% bracket first — If your only income is Social Security, you may have room to withdraw/convert up to ~$96,950 (married) at 12%
• Then fill the 22% bracket — Up to ~$190,750 (married) is often the sweet spot for conversions, depending on your future RMD projections
• Avoid 32%+ unless necessary — The jump from 24% to 32% is steep. Try to keep income below this threshold through strategic withdrawal sequencing

Use a tax-efficient withdrawal order to control your bracket: draw from taxable accounts for spending while converting tax-deferred to Roth up to your target bracket.

Strategy 3: IRMAA Bracket Management

IRMAA operates on cliffs, not gradual increases. Exceeding a threshold by even $1 triggers the full surcharge for the year. Key strategies:

• Know your thresholds: Map out the IRMAA brackets and plan income to stay just below the next cliff
• Use Roth in IRMAA-sensitive years: In years where you're near a threshold, use Roth withdrawals instead of tax-deferred to stay below the line
• Time capital gains: Defer or accelerate asset sales to manage which tax year the income falls in
• Consider QCDs at 70½: Qualified Charitable Distributions from IRAs satisfy RMDs without counting as taxable income — directly reducing MAGI and IRMAA exposure

Strategy 4: Diversify Account Types

High-income earners often have most of their wealth in tax-deferred accounts. The goal is to rebalance across three tax buckets before RMDs force your hand:

• Tax-deferred (Traditional IRA/401k): Target reducing this to a level where RMDs stay in the 12-22% bracket
• Tax-free (Roth IRA/401k): Build this through conversions — provides tax-free income and IRMAA-invisible withdrawals
• Taxable (Brokerage): Maintain for flexibility — capital gains rates are lower than ordinary income rates

Strategy 5: Manage Concentration Risk

High earners often have concentrated positions — company stock in a brokerage account, RSUs, or stock options. In retirement:

• Diversify gradually: Sell concentrated positions over multiple years to spread capital gains across tax years
• Use the 0% capital gains bracket: In low-income years (early retirement before SS), sell appreciated stock at the 0% long-term capital gains rate (up to ~$94,050 for couples)
• Consider NUA: If you have employer stock in a 401(k), Net Unrealized Appreciation rules may allow favorable tax treatment on the stock's growth

Common Mistakes High-Income Retirees Make

1. Waiting too long for Roth conversions — Every year you delay, the tax-deferred balance grows, future RMDs get larger, and the conversion window shrinks. Start converting the year you retire (or even before if income drops).
2. Ignoring IRMAA until it hits — IRMAA is based on 2-year-old income. By the time you see the surcharge, it's too late to change. Plan IRMAA two years in advance.
3. Assuming lower spending = lower taxes — Even if you spend modestly, RMDs force income (and taxes) regardless of spending needs. The tax problem is about forced income, not spending.
4. Not modeling the full picture — RMDs interact with Social Security taxation, which interacts with IRMAA, which affects net income. You need year-by-year modeling to see the cascading effects.

Using Bullseye for High-Income Planning

Bullseye is particularly valuable for high-income retirees because of the cascading tax interactions:

• RMD projections — See exactly what your RMDs will be each year through age 95, and how they interact with other income sources
• IRMAA bracket tracking — Bullseye shows when your income crosses IRMAA thresholds and how much extra you'll pay in Medicare premiums
• Tax bracket visualization — See your federal and state tax bill year by year, making it easy to identify which years have room for conversions
• Scenario testing — Model different Roth conversion amounts and see the lifetime tax impact. Compare "no conversions" vs. "$100K/year" vs. "$200K/year" strategies.
• Social Security coordination — For high earners, the interaction between SS, RMDs, and IRMAA makes claiming age optimization more complex. Bullseye models all three together.