Here is the setup: a 68-year-old couple has $1.5 million sitting in traditional IRAs, a pension, and Social Security. Household income runs around $85,000 a year, and the IRA has not been touched. Life is comfortable. The temptation is to leave the IRA alone and let it compound.
But that instinct is expensive. At 73, required minimum distributions begin, and the IRS stops caring whether the money is needed. On a $1.5 million balance, first-year RMDs land near $57,000 and grow every year after. That income stacks on top of the pension and Social Security, pushes the couple into higher brackets, and triggers Medicare surcharges (IRMAA) that follow them for life. So the five tax years between 68 and 72 are critical.
Why the Pre-RMD Window Is So Valuable
Right now, this couple sits in the 12% bracket. The 2026 standard deduction for married filing jointly is $32,200, and the 22% bracket runs from $100,800 to $211,400 in taxable income, with the 24% bracket extending all the way to $403,550. There is enormous headroom above $85,000 of ordinary income before hitting the 32% cliff.
Roth conversions fill that headroom on purpose. Move dollars from the traditional IRA into a Roth, pay ordinary income tax on the amount moved, and the balance grows tax-free forever with no future RMD. Fidelity data shows the average Baby Boomer IRA balance is only about $257,002, so a $1.5 million pre-tax balance is well above the norm and even more exposed to future bracket creep.
Converting roughly $120,000 per year for five years moves about $600,000 into the Roth. Each conversion year, taxable income lands somewhere in the 22% to 24% zone. The alternative is doing nothing and letting a growing IRA push RMDs into 32% or 35% territory a decade from now, especially after one spouse dies and the survivor files single, where the same brackets kick in at roughly half the income.
The payoff has three layers:
- Smaller RMD base at 73. Halving the pre-tax balance roughly halves lifetime forced income, which keeps the couple out of higher brackets and out of the top IRMAA tiers.
- Widow protection. Single brackets are punishing. A surviving spouse with a large traditional IRA can jump two brackets overnight for the same standard of living. A Roth balance sidesteps that entirely.
- Cleaner inheritance. Under the 10-year rule, heirs must drain an inherited IRA within a decade and pay taxes. An inherited Roth drains tax-free.
The Real Tradeoffs
Two caveats matter. First, every conversion year likely bumps modified adjusted gross income above the IRMAA thresholds, adding roughly a 1% to 2% drag on the converted amount through higher Medicare premiums two years later. That surcharge is real, and it needs to be modeled, but it is almost always smaller than the bracket arbitrage the conversion captures.
Second, Roth conversions cannot be undone. Convert too much in a single year, and there is no take-back. This is why converting without projecting future brackets, Social Security taxation, and IRMAA tiers is the most common way people over-convert.
Opportunity cost is worth naming too. With the 10-year Treasury near 4.7% and the 30-year at 5.3%, the tax dollars paid on a conversion could otherwise sit in safe bonds. Even so, tax-free compounding inside a Roth generally wins over a 15- to 25-year horizon.
What to Do First
Two concrete takeaways for anyone recognizing themselves in this scenario:
- Model the full bracket ladder before touching a dollar. Include the pension, Social Security taxation (the 2026 COLA was 2.8%, so benefits grow every year), projected RMDs at 73, and IRMAA tiers. Then size the annual conversion to fill the 22% or 24% bracket without spilling into 32%.
- Avoid the all-at-once mistake. Converting $600,000 in a single year would blow through the 32% and 35% brackets and trigger the highest IRMAA tier. Spread across five tax years, the same dollars move at half the marginal rate.
This is a situation where a fee-only advisor pays for themselves in the first meeting. With a $1.5 million pre-tax balance, a five-year conversion plan, and IRMAA surcharges to sequence, the difference between a good projection and a guess is easily six figures over a lifetime. Have someone help you build the multi-year tax model before signing the first conversion form.
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