This case study follows "Mark," a 66‑year‑old retired engineer (name changed), who used a short period of part‑time employment to defer required minimum distributions (RMDs), make targeted Roth conversions, and reduce long‑term tax exposure on Social Security and retirement accounts. Mark’s choices illustrate a specific, carefully executed tactic that retirement planners should understand: using an employer 401(k)’s “still working” RMD deferral to buy time for tax‑efficient Roth IRA conversions.

Background: assets, goals and constraints

When Mark first sought advice in early 2026 he had the following picture:

  • IRA (traditional): $720,000 held at a retail brokerage.
  • Current employer 401(k): $210,000 at the company plan (his former employer re‑hired him as a part‑time consultant with W‑2 wages and plan participation).
  • Pension: $1,050 per month survivor‑reduced single life annuity (small, not a primary income source).
  • Social Security: full retirement benefit available, but Mark planned to delay claiming until age 70 to maximize his benefit and survivor protection.
  • Other income: modest part‑time W‑2 wages of roughly $30,000 annually during his intended re‑employment period; no private annuities, no backdoor Roth history.

Mark’s objectives were to (1) minimize taxes over the next 10–15 years, (2) preserve flexibility for his spouse, and (3) reduce the eventual tax impact of large RMDs on his Social Security taxation and Medicare IRMAA exposure.

The strategy chosen

Mark and his advisor agreed on a three‑part plan:

  1. Return to part‑time W‑2 employment with the same employer and remain on the payroll through the upcoming RMD deadline years.
  2. Roll his retail traditional IRA into the employer 401(k) plan while still working, thereby enabling deferral of RMDs from the rolled‑in balance because the employer plan allows RMDs to be postponed for active employees (a rule many employers’ plans follow under current mid‑2020s regulations).
  3. Use the extra years before mandatory withdrawals to perform staged Roth IRA conversions in low‑income years, paying taxes now at lower marginal rates and reducing the balance subject to future RMDs and taxable Social Security interactions.

Why that sequence matters

Two technical points drove the sequencing.

  • RMD deferral for active employees applies to funds in the current employer’s qualified plan, not to IRAs. Rolling the IRA into the 401(k) made more of Mark’s retirement savings eligible for deferral while he remained employed (so long as the plan accepts roll‑ins and Mark is not a 5% owner).
  • RMD amounts themselves cannot be converted to Roth in the same year they’re required; if an RMD is due it must be taken first. By deferring the RMD via continued employment and plan roll‑ins, Mark avoided being forced to take large taxable RMDs that would have inflated his tax liability and increased the taxable portion of Social Security.

Execution — practical steps

Timing and paperwork were important. Mark’s advisor handled the following:

  • Confirmed the employer 401(k) accepted incoming rollovers from IRAs and verified the plan’s investment lineup and fees (a key due diligence step — not all plans accept roll‑ins or offer good choices).
  • Arranged a direct trustee‑to‑trustee rollover of $700,000 of the IRA into the employer 401(k) in Q1 2026, leaving a small cash cushion for taxes and living expenses. This avoided an inadvertent distribution tax by preventing a check from being made out to Mark personally.
  • Maintained his W‑2 status through late 2027, thereby postponing 401(k) RMDs until he finally stopped working. During those two plan years he planned Roth IRA conversions from separate sources (see below).
  • Set up a Roth IRA at a low‑cost custodian to receive conversions and configured a schedule to convert $125,000 in 2026 and $125,000 in 2027 — amounts chosen to fit within Mark’s projected marginal tax brackets and to avoid pushing him into higher Medicare IRMAA brackets or excessive Social Security taxation.

Tax math and outcomes (illustrative)

Numbers below are illustrative but show the mechanics.

  • Before the plan, Mark would have faced RMDs on roughly $720,000 in an IRA starting that year, likely creating a large taxable distribution and pushing him into higher marginal brackets and increasing the taxable portion of Social Security.
  • By rolling $700,000 into the 401(k) and deferring RMDs for two years he avoided two tax years of large forced distributions. That created a window to perform controlled Roth conversions financed partly from wages and cash savings.
  • Converting $125,000 in each of two low‑income years allowed Mark to fill the 22%/24% federal tax brackets instead of taking a single big RMD that would have been taxed at 32%+ marginal rates. Paying the lower marginal tax on conversions reduced overall federal tax and lowered the future IRA base that would produce RMDs.

Net effect: Mark paid known tax on Roth conversions when rates were manageable, reduced the size of accounts subject to future RMDs, and kept taxable income in each conversion year to a level that minimized the taxable portion of delayed Social Security benefits.

Operational and planning caveats

This approach worked for Mark because several conditions aligned. It is not universally available or appropriate.

  • Plan acceptance: Not all employer 401(k) plans accept rollovers from IRAs. Before moving money, confirm plan policy and request a written statement outlining investment options and fees.
  • Employment status: The RMD deferral privilege applies only to the current employer’s qualified plan while you’re actively employed. If you become a 5% owner or are reclassified as an independent contractor, the deferral may not apply.
  • Roth limits: Roth IRA conversions are taxable events. They make sense only when you expect future tax rates, RMD‑sourced withdrawals, or Medicare/IRMAA impacts to make future taxes worse than today’s known bill.
  • Roth timing and Medicare: Large conversions can trigger higher Medicare IRMAA surcharges or affect premium brackets. Mark’s advisor modeled Medicare and Social Security provisional income before finalizing conversion amounts.
  • Pensions and survivor benefits: Mark’s pension and survivor objectives required separate modeling. Because pensions can be taxable and affect provisional income, coordination is necessary — but the 401(k) rollover strategy did not affect pension status directly.

Lessons for retirement‑planning enthusiasts

Mark’s case highlights several practical lessons you can take to client conversations or your own planning:

  • Check plan rules early. Determine whether your current employer’s 401(k) accepts roll‑ins from IRAs and whether it permits RMD deferral for active employees.
  • Use employment status strategically. A short return to W‑2 employment can create planning flexibility — but it must be weighed against lifestyle, employer eligibility, and tax tradeoffs.
  • Model conversions against all taxes. Account for federal brackets, Social Security taxation, and Medicare IRMAA when sizing conversions; the best conversion amount is the one that minimizes total lifetime taxes and premium penalties, not just current marginal rate.
  • Prioritize execution safety. Use trustee‑to‑trustee transfers and get written confirmations from plan administrators to avoid accidental taxable distributions.
  • Coordinate with survivor goals. Roth IRA balances pass to beneficiaries differently than pensions; coordinate Roth conversions with the legacy plan and survivor income needs.

Conclusion

Mark’s decision to return to part‑time work and roll a large IRA into his current employer’s 401(k) bought valuable time and created an opportunity for controlled Roth IRA conversions. The result was lower overall taxable exposure in retirement, a smaller base for future required minimum distributions, and a better arrangement for Social Security taxation and survivor planning. That combination — plan diligence, careful timing, and conversion‑sizing modeled against Social Security and Medicare effects — is a practical blueprint other retirees can adapt when the same plan rules are available to them.

As always, the specifics depend on your employer’s plan language, current tax law, and your health and family circumstances. Talk to a fiduciary advisor and your plan administrator before attempting the rollover/deferral‑plus‑conversion strategy.