What Forty Years of Coasting Does to Your Tax Bill at 75

Most people who reach a coast FIRE number know it precisely. They have tested it against the 4 percent rule, argued about safe withdrawal rates, and modeled a few return scenarios in a spreadsheet. One variable rarely makes it into those spreadsheets: what the IRS requires of your pre-tax accounts once you turn 75.

We work with retirees on exactly this question every day, and coast FIRE turns out to be one of the situations where it matters most. The reason is the same mechanism that makes coasting work in the first place. You save hard early, then let compounding carry the balance for decades. That long runway is the whole point. It is also what builds a larger forced tax event later than almost any other approach to retirement.

Why coasting makes the effect larger, not smaller

Most coast FIRE plans are funded with pre-tax dollars. That is a reasonable choice at the time. The traditional 401(k) deduction lowers your tax bill during your highest-savings years, which is when the deduction helps the plan most.

The difference between a coaster and a traditional retiree shows up decades later. A traditional retiree often begins drawing down pre-tax accounts in their sixties, spending those balances over ten or fifteen years before required distributions begin. A coaster usually does the opposite. You hit your number, you stop contributing, and you leave the pre-tax balance alone. Stopping contributions does not stop the account. A balance left untouched at 38 keeps compounding until the IRS forces the issue.

Required minimum distributions currently begin at 73. For anyone born in 1960 or later, which covers essentially everyone reading a coast FIRE site today, the starting age is 75 under the SECURE 2.0 rules. That later start date is often described as good news. In this specific case it works the other way. More years of compounding before the first required withdrawal means a larger balance to withdraw from.

The math, with numbers you can rerun

Consider a hypothetical 38-year-old with $600,000 spread across a pre-tax 401(k) and a traditional IRA. Assume a 5 percent real return, so every figure stays in today’s dollars, and assume no further contributions. Just coasting.

By age 75, that $600,000 grows to roughly $3.6 million in today’s purchasing power.

The first required distribution at 75 uses an IRS divisor of 24.6, which comes to about 4.1 percent of the balance. On $3.6 million, that is a required withdrawal of about $148,000 in the first year alone. You did not choose the timing. The distribution is taxed as ordinary income whether or not you need the money that year.

The divisor also shrinks with age, so the required percentage rises over time. The withdrawal floor moves from about 4 percent at 75 to 5 percent at 81 and 6 percent at 85. If the account keeps growing faster than the required withdrawals drain it, taxable income can keep climbing well into your eighties.

Run the same exercise with your own inputs. A $500,000 balance at 35, growing at 7 percent nominal for 40 years, passes $7 million, with a first-year required distribution above $290,000. The larger the balance and the longer the coast, the larger the eventual number.

The lower-bracket assumption often breaks

Pre-tax saving rests on one assumption: that you will be in a lower tax bracket when the money comes out. For coasters with large balances, that assumption frequently does not hold.

A six-figure required distribution does not arrive in isolation. It stacks on top of Social Security and can push up to 85 percent of those benefits into taxable territory. It feeds the income figure that sets your Medicare premiums two years later, where crossing a single IRMAA threshold can add thousands of dollars a year in surcharges for a married couple. It fills brackets you assumed you had left behind in your working years.

There is a second effect that is easy to overlook. When one spouse dies, the survivor generally continues taking similar required distributions, but now files as a single taxpayer, where the brackets are roughly half as wide. Similar income, a higher rate. It is a common and underplanned outcome for couples with large pre-tax balances.

The plan to simply never spend the money and leave it to your children ran into a wall in 2019. Under the SECURE Act, most non-spouse heirs now have to empty an inherited pre-tax account within ten years, and that decade often lands during their own peak earning years. Deferred taxes become an inherited tax problem, compressed into a shorter window.

Coasters hold an unusual advantage here

There is a genuinely encouraging side to this, and it is specific to how coast FIRE works. The strategy creates something valuable for tax planning: a long stretch of deliberately low income.

The years between leaving full-time work and reaching required distribution age are the years when Roth conversions cost the least. A conversion moves money from a pre-tax account to a Roth account. You pay ordinary income tax on the amount you convert now, and in return that money grows tax free from then on, with no required distributions on a Roth IRA during your lifetime.

A traditional retiree might have ten or fifteen low-income years to work with. Someone who downshifts at 40 could have thirty-five. Each of those years is an opportunity to convert an amount that fits inside the lower brackets, on your schedule, rather than leaving the full balance to be forced out in the upper brackets on the government’s schedule.

The goal is not to convert everything at once. Conversions carry their own tradeoffs. The tax is due in the year you convert, a large conversion near Medicare age can trigger IRMAA surcharges, and the right annual amount depends on your bracket, your state, your other income, and what the balance is likely to become. Converting too aggressively can cost more than doing nothing. The right answer is a sequence, worked out year by year, which is why this rewards real modeling over a rule of thumb.

Three steps worth taking this month

First, make the number visible. Project your pre-tax balance forward to age 75 at a couple of return assumptions, then look at what the IRS tables would require you to withdraw from it. A free RMD calculator built on the current IRS Uniform Lifetime Table will do this in a few minutes. Seeing that figure written down is usually the moment the pre-tax versus Roth question stops feeling abstract.

Second, count your low-bracket years. Look at how many years your coast plan puts between now and 75 where your taxable income is genuinely low. Each of those years is conversion capacity that resets every January, whether or not you use it.

Third, match the response to the size of the problem. If your projected pre-tax balance is modest, redirecting future contributions toward Roth and revisiting annually may be enough. If it runs into high six figures or more, the difference between a careful conversion sequence and a haphazard one can amount to a large share of your lifetime tax, and it is worth modeling properly.

The default plan is the expensive one. Coast for forty years, leave the balance untouched, and let the IRS table decide your retirement income. You did not leave your savings rate to chance. This part deserves the same attention.