What Are the Gap Years?
The Gap Years are the period between when you retire and when Required Minimum Distributions (RMDs) force taxable income out of your tax-deferred accounts. For most retirees, that window is 8 to 12 years long: stop working in your early sixties, start RMDs at 73 or 75 under SECURE Act 2.0.
During these years, you have something you've never had before and will never have again: control over your taxable income. You're not earning a salary. You're not yet forced to take distributions. Whatever you pull out of your IRA, you choose. Whatever stays in, grows tax-deferred.
This sounds like an obvious advantage, and it is. But almost no one uses it well. Most retirees default to "spend down taxable accounts first, leave the IRA alone until 73" — which is the worst answer for most households and a fine answer for nobody.
The bracket-fill opportunity, the IRMAA cliffs, the surviving-spouse tax bomb — these are the three big levers that show up only in this window, and they compound on each other. Get them right and a $2M household saves $300K–$500K of lifetime federal tax. Miss them and that money goes to the IRS.
The Four Levers
Every Gap Years plan moves four levers in coordination. Pull one without the others and you leave most of the value on the table.
For most healthy married couples, the higher earner should delay to 70. The lower earner often claims earlier. The break-even age is usually around 81 — meaning if either spouse lives past 81, delaying wins. The asymmetric upside, plus the survivor benefit, makes this one of the highest-leverage decisions in retirement.
Move money from traditional IRA to Roth IRA during low-bracket years. Pay tax now at 22% to avoid tax later at 32% — and to remove the asset from future RMDs entirely. The right amount is rarely "all of it" and rarely "none."
Which bucket do you draw from first — taxable, tax-deferred, or Roth — and in what proportion? The textbook answer (taxable → tax-deferred → Roth) is almost always wrong for high-net-worth retirees because it wastes the bracket-fill window.
Build a guaranteed income floor that covers non-discretionary expenses (Social Security + a small annuity if the math demands one), so the portfolio funds the discretionary layer. For some households this means a MYGA, for some a SPIA, for many it means doing nothing — but the analysis is the same.
The Bracket-Fill Opportunity
Here's the simplest example. A married couple, both 62, retiring with $2M in a traditional IRA, $500K in taxable, and $100K cash. No pension. They plan to claim Social Security at 70.
From 62 to 70, their only income is whatever they choose to take out. Take $0 from the IRA and they pay ~0% federal tax — but they're wasting the 22% bracket every year. Take exactly enough from the IRA to fill the 22% bracket (~$100K of taxable income in 2026 numbers for MFJ), convert that to Roth, and they pay ~$22K of tax that year. Over eight years, that's $176K of tax paid to convert ~$800K of pre-tax IRA into Roth.
The "do nothing" plan looks cheaper in the gap years (no tax paid). It is dramatically more expensive over a lifetime. RMDs at 73 push the couple into the 24% bracket; widow(er) RMDs push the survivor into the 32% bracket. Converting at 22% during the gap years prevents both.
The IRMAA Cliffs
IRMAA — Income-Related Monthly Adjustment Amount — is the surcharge Medicare adds to your Part B and Part D premiums when your income crosses certain thresholds. It's a cliff, not a curve: cross by a dollar and your annual Medicare cost can rise by hundreds or thousands.
| MAGI (MFJ) | Part B / mo | Annual surcharge / couple |
|---|---|---|
| ≤ $212,000 | $185 | $0 |
| $212,001 – $266,000 | $259 | + $1,776 |
| $266,001 – $334,000 | $370 | + $4,440 |
| $334,001 – $400,000 | $480 | + $7,080 |
| $400,001 – $750,000 | $591 | + $9,744 |
| > $750,000 | $628 | + $10,632 |
The asymmetry is brutal. Going one dollar over $266,000 of MAGI costs a couple an extra $2,664 in Medicare premiums for that year — a marginal tax rate of 266,400% on that dollar. Multiply across two-year IRMAA lookbacks and you can land in penalty territory for income you earned two years ago, when you didn't realize it would matter.
Large Roth conversions deliberately blow through IRMAA tiers — that's fine, you're paying the surcharge once to escape a structurally higher tax bracket forever. The mistake is accidentally blowing through one: a one-time capital gain, a large RMD year, a delayed pension lump sum. Year-by-year IRMAA awareness is part of every plan we build.
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We'll tell you on the call whether your situation needs the Snapshot, the Gap Years Plan, or whether the math is already done.
Book the intro callThe Surviving-Spouse Tax Bomb
When one spouse dies, the survivor's federal tax filing status changes from Married Filing Jointly to Single in the year following the death. The income doesn't change much. The brackets get cut in half.
A couple with $180K of taxable income lands squarely in the 22% bracket as MFJ. The same income as a single filer reaches into the 32% bracket. RMDs from a $2M IRA produce ~$76K of taxable income; on top of a $50K pension and $50K of Social Security, the surviving spouse easily crosses into 32% — and into a higher IRMAA tier — while doing nothing differently.
This is the strongest case for aggressive Roth conversions during the MFJ years. Every dollar in Roth is a dollar that doesn't push the surviving spouse into a higher bracket twenty years from now. Every dollar left in the IRA does.
For couples with a meaningful age gap, the math becomes overwhelming: converting hard during the joint years can save the surviving spouse $200K+ over the remainder of their lifetime. We model survivorship scenarios in every Gap Years Plan.
How to Build a Gap Years Plan
The plan is the same four steps we walk every client through:
- 1. Gather the data. Tax returns (3 years), all account statements, SS estimates, pension docs, in-force insurance illustrations.
- 2. Model the levers. SS claim, Roth conversions, withdrawal sequence, income floor — independently and together.
- 3. Stress-test. What if either spouse dies at 70? What if you live to 95? What if returns are 4% instead of 7%? What if tax brackets revert?
- 4. Document the schedule. Year-by-year, by account, with dollar amounts. Handed to you and your CPA.
What to Do Next
Three paths from here:
- →See pricing if you're ready to compare the three engagement tiers.
- →Book the free intro call if you want to talk through your situation first.
- →Read about us if you want to know who you'd be working with.
If you'd rather read longer-form analysis on a specific lever — IRMAA strategy, MYGA vs. SPIA comparisons, when not to convert — the blog is coming. Email hello@algoliadvisors.com with what you'd like to read first.