Building the Bridge
to Retirement Income

The Situation

The five years surrounding a retirement date carry more financial consequence than almost any other stretch of a working life. A decision made once — when to stop working, when to enroll in Medicare, how large a Roth conversion to run — can echo for the next twenty-five years in the form of taxes, premiums, and portfolio longevity. This couple was standing at the edge of that window with no coordinated plan.

Several pieces needed to fit together at once:

• She planned to retire at 63, two years before Medicare eligibility — meaning health coverage had to be bridged through COBRA or an ACA marketplace plan without derailing their budget
• Roughly $2.1M sat in pre-tax 401(k) and IRA accounts, building toward required minimum distributions at 73 that would eventually push them into a higher tax bracket than they'd ever seen while working
• A small pension and Social Security would eventually cover their baseline expenses, but the gap years between retirement and those income sources starting needed to be funded from savings without derailing the long-term plan
• Neither had ever heard of IRMAA, and had no idea that a large one-time withdrawal could raise their Medicare premiums two years later
• They wanted to help their daughter with a down payment in the next few years — a goal that had to be weighed against their own income plan, not funded reflexively

The Roth Conversion Window

Once she retired and before Social Security and RMDs began, the couple entered the lowest-income years of their adult lives — precisely the window where Roth conversions do the most good. We used IncomeLabs' Roth conversion modeling tool to test conversion amounts year by year, filling up their current tax bracket deliberately without spilling into the next one, and without tripping the IRMAA and ACA subsidy thresholds we'd already mapped out.

The resulting plan converted a portion of their pre-tax balances every year for six years — moving assets into tax-free growth, shrinking the account balance that would otherwise generate outsized RMDs starting at 73, and doing it all at a lower effective tax rate than they were likely to pay later.

Coordinating Social Security and Withdrawals

Rather than defaulting to "claim at 70," we modeled several claiming ages for both spouses against their full balance sheet — factoring in the pension, the shrinking pre-tax balances from the Roth conversion plan, and their own health and family longevity. The analysis weighed the guaranteed increase from delaying against the flexibility of claiming earlier and drawing down the portfolio less aggressively during the bridge years. The chosen strategy staggered their claiming ages, balancing lifetime income against the portfolio withdrawal rate needed in the interim.

With claiming ages set, portfolio withdrawals, pension income, and Roth conversions were coordinated on a single year-by-year timeline — so every dollar of income had a reason for existing that year, and no single year created an unnecessary tax or premium consequence.

The Health Insurance Bridge

With her retiring at 63, the first order of business was closing the two-year gap before Medicare eligibility. We compared COBRA continuation coverage against ACA marketplace plans, and the marketplace won — but only because we could manage their reported income to qualify for a meaningful premium subsidy. That meant being deliberate about which accounts funded their spending during those two years: pulling from taxable brokerage and Roth balances kept their modified adjusted gross income low enough to preserve the subsidy, while pulling from pre-tax accounts would have both raised their premiums and reduced the subsidy in the same stroke.

This is where sequencing decisions start to compound. The account you draw from isn't just a tax question — it's a health insurance question, an IRMAA question, and a Roth conversion question, all determined by the same number: taxable income for the year.

Managing IRMAA While Building Income

Medicare Part B and Part D premiums step up sharply above certain income thresholds — and the surcharge, known as IRMAA, is based on a tax return from two years earlier. That lookback catches people off guard constantly: a large withdrawal, a Roth conversion, or a one-time capital gain in one year can raise Medicare premiums for a full year two years later, often by thousands of dollars per couple.

We built their income plan around the IRMAA brackets from the start rather than discovering the problem after the fact. Every projected withdrawal, conversion, and pension start date was mapped against those thresholds for both the bridge years before Medicare and the years after, so a good decision in one column of the plan didn't become an expensive surprise in another two years later.

The Outcome

In this hypothetical scenario, the strategies described produced the following illustrative outcomes. Within the first year of the engagement, the couple had:

• A health insurance bridge plan using ACA marketplace coverage, with withdrawal sourcing designed to preserve their premium subsidy through Medicare eligibility
• An income and withdrawal sequence mapped year-by-year through retirement, coordinating taxable, Roth, and pre-tax accounts against IRMAA thresholds
• A six-year Roth conversion plan designed to shrink future RMDs while filling up current, lower tax brackets
• A staggered Social Security claiming strategy balancing lifetime benefit growth against near-term withdrawal needs
• A Medicare enrollment plan timed to her 65th birthday with no coverage gap or late-enrollment penalty
• A clear framework for evaluating the daughter's down payment gift against their own income plan, rather than an ad hoc decision

For the first time since they'd started saving, the couple had a plan that connected every account, every premium, and every claiming decision into a single timeline — one built around the years that mattered most, not just the decades they'd already gotten right.