Two Couples Retire at 62 With $600,000 Each in IRAs. One Lives on a Pension and Leaves the IRAs Alone. The Other Converts $45,000 a Year at 12%. At 73, One Faces a $39,000 RMD and the Other $15,000

Consider two couples who retire early, and each has $600,000 in traditional IRAs. At 73, one couple has to take a required minimum distribution (RMD) of about $39,000, while the other couple’s RMD is about $15,000. The whole gap comes from how each household used the years in between. For many retirees, those years fall in the lowest tax brackets they will see for the rest of their lives.

On the plus side, both couples have more saved than most peers. The median retirement account balance for households aged 55 to 64 is $185,000, while the mean is $537,700.

Same Starting Balance, Two Different Plans

Both cases assume the IRAs earn 5% a year. The first couple lives on a pension and never touches the IRA, growing it to about $1.03 million by year-end when they turn 72. The IRS uses that balance to set the first RMD. The second couple converts $45,000 a year from the traditional IRA into a Roth IRA at 12% tax, using cash held outside the IRA to pay $5,400 to the federal government. For married couples filing jointly in 2026, the 12% bracket covers taxable income from $24,801 to $100,800. Income above that is taxed at 22%.

How 26.5 Sets Each Couple’s Tax Bill at 73

The IRS Uniform Lifetime Table gives a distribution period of 26.5 for the first RMD year. For the pension couple, $1.03 million divided by 26.5 produces an RMD of roughly $39,000 annually.

The converting couple has about $387,000 left in the traditional IRA, producing an RMD of roughly $15,000, a significant savings over the first couple. Over 11 years, they converted $495,000 and paid $59,400 in federal taxes. The converted money grew to about $639,000 inside the Roth, with no future RMDs and tax-free qualified withdrawals.

Why Pension Income Makes the Bigger RMD Costlier

For the pension couple, the $39,000 RMD comes on top of income that already pays their bills, and if pension and Social Security checks already cover living expenses, the RMD is unnecessary income and fully taxable.

Taxable income rises each year as Social Security benefits increase, and the RMD factor shrinks annually, so the required withdrawal takes a growing share of the account. Once total taxable income passes $100,800, part of each RMD is taxed at 22%.

What the Comparison Leaves Out

Whether converting pays off depends on future tax rates. The converting couple paid the same rate ten years early. If the pension couple’s RMDs stay inside the 12% bracket, the $59,400 sent to the IRS missed years of growth. Conversions also raise income in the year they happen, potentially shrinking Affordable Care Act subsidies and raising Medicare premiums later.

The scenario’s RMD start age of 73 applies to people born from 1951 through 1959. Anyone with a birth year of 1960 or later starts RMDs at 75. A younger couple would get extra years of growth with no withdrawals, resulting in a larger first RMD.

Where to Focus Between 62 and 73

The two outcomes split during the years between retirement and the first RMD. Three checks show which approach fits a particular household:

1. Estimate taxable income for each year and compare it with the $100,800 top of the 12% bracket to find room for conversions.
2. Pay conversion taxes with cash held outside the IRA to avoid shrinking the Roth.
3. Estimate the first RMD using the 26.5 factor and compare it with pension and Social Security income.

The pension couple’s account grew past $1 million. But the bill comes due at 73, when the IRS sets the required withdrawal and taxes it at the applicable rate. The converting couple paid earlier on their own schedule. They chose their rate, and we walked through how to shrink that first-year tax bill years before it lands in a free guide here. That timing choice separates a $39,000 RMD from a $15,000 one.

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