Abaque 05 · Synthesis

The retirement corridor

Four statutory mechanisms govern what it costs to move money out of a pre-tax account: the ordinary rate schedule, the Social Security inclusion formula, the Medicare surcharge with its two-year lookback, and the ACA credit cliff. Each opens and shuts at a different age, and they overlap. The corridor is the stretch of years where the fewest of them are active at once — and it is bounded on both ends by statute, not by choice.

ReadsCost per age
Corridor—
Cheapest age—
RegisterSheet 00
Sheet05 · Rev A
Inputs

Enter the chart here

Filing status
Sets every threshold on the sheet.
Birth year1969
—
Stop working at62
Marketplace coverage runs from here to 65.
Claim Social Security at70
—
Other taxable income$35,000
Pension, interest, wages. Include salary if still working.
Annual SS benefit$30,000
Household total, once claimed.
Conversion tested$80,000
The block of pre-tax money moved in one year.
Pre-tax balance at 60$900,000
Drives the forced RMD only. Set 0 to ignore.
ACA credit at risk$12,000
Annual premium credit lost if you cross 400% FPL.
Fig. 1

Which mechanisms are active at each age

Corridor — fewest constraints Constraint active Window shuts here
Read down the column at any age to see what is switched on. The corridor is not chosen — it is what is left over once the ACA cliff has closed at 65, the IRMAA lookback has opened at 63, benefits have started, and RMDs have begun. Every one of those dates is fixed by statute or by a decision you make once.
Fig. 2

What the same conversion costs at each age

Federal income tax Medicare surcharge + lost ACA credit Cheapest year
The identical conversion, priced in every year it could be done. The bars are not smooth because two of the four mechanisms are cliffs, not ramps: crossing 400% of the poverty level forfeits the entire premium credit, and crossing an IRMAA threshold buys the whole tier. The cheapest year is rarely the earliest one.

One caveat on the years before you stop working. The sheet applies the same “other income” at every age, so if the corridor lands before your retirement age it is quietly assuming you have no salary in those years. If you are still earning, raise other income to your actual wage before reading the left-hand end of this chart — conversions made while working are usually the most expensive of all.

Cheapest year——
Cost there——
Worst year——
Spread——
Calculation

Every step, at the age you select

Age examined63
Table 1

Year by year

AgeYearBase incomeFed tax IRMAAACA lostTotal costEffective rateActive
Method, and what this deliberately does not model

The cost of one conversion, at one age

For each age the same block of money is moved, and the sheet prices it four times over:

cost(age) = Δfederal tax + Δ Medicare surcharge (if age ≥ 63) + ACA credit forfeited (if retired and age < 65)

Δfederal tax is the difference between the tax with and without the conversion, computed through the full chain: provisional income → taxable Social Security → AGI → taxable income → tax. Because the conversion raises provisional income, it can drag benefits into AGI alongside itself — the torpedo — so the conversion is charged for that too.

Why 63 and not 65

The Medicare surcharge runs on a two-year lookback: this year's premium is set by the MAGI you reported two years ago. So the first income year that can raise a Medicare premium is the year you turn 63, not 65. That single fact moves the useful end of the conversion window two years earlier than most people assume, and it is the reason this sheet exists rather than three separate ones.

Why the corridor shuts

Required distributions do not merely add income — they add income you cannot decline. The divisor shrinks every year, so on a flat balance the forced amount rises. Once RMDs begin, every conversion stacks on top of them, and the low brackets that made the corridor cheap are already spent.

What is not modelled

  • State income tax. Not federal statute, varies enormously, and several states tax retirement income the federal code exempts. Its absence can easily move the answer.
  • Growth, returns and inflation. Every figure is in today's dollars. Indexed thresholds are held at their 2026 values, which understates future room in the low brackets; the frozen ones would not have moved anyway.
  • The 3.8% net investment income tax. Conversions are not themselves net investment income, but they raise the MAGI that determines whether other income is exposed.
  • Spousal timing, survivor filing status, and widowhood. A surviving spouse moves to single brackets with roughly the same income — often the largest single rate increase in a retirement, and entirely outside this sheet.
  • Whether a conversion is a good idea at all. This prices the transaction. Sheet 02 covers whether the trade is worth making.

Confidence

Thresholds come from the register on sheet 00 and carry its flags. The RMD divisor table is marked Unverified — check it against the current Treasury regulation before leaning on any RMD figure here. The 2026 bracket edges and standard deductions are Approx pending the revenue procedure. The Social Security inclusion thresholds and the two-year lookback are Verified and, being frozen, will still be right next year.

This is arithmetic, not advice. Every dollar figure is approximate and re-indexed. The sheet prices a transaction under stated assumptions; it does not know your state, your spouse, your health, or your plans, and a conversion strategy is exactly the kind of decision worth taking to a CFP or CPA. The shapes — the two-year lookback, the cliff at 65, the shutting of the window at the RMD age — are the durable part.
Indexed figures are re-set every January and this snapshot will go stale. Get notified when they are re-verified → · All twelve sheets