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, each with $600,000 in traditional IRAs. At 73, one couple must take a required minimum distribution (RMD) of about $39,000, while the other couple’s RMD clocks in at about $15,000. The entire gap traces back to how each household used the years in between. For many retirees, those years represent the lowest tax brackets they will ever see again.

On the plus side, both couples have more saved than most peers. According to the Federal Reserve’s 2025 Survey of Consumer Finances, the median retirement account balance for households aged 55 to 64 is $239,000, while the mean is $670,200.

Same Starting Balance, Two Different Plans

Both scenarios assume the IRAs earn 5% a year. The first couple lives on a pension, never touches the IRA, and watches it grow to about $1.03 million by year-end when they turn 72. The IRS uses that December 31 balance to calculate the first RMD. The second couple takes a different path: converting $45,000 a year from the traditional IRA into a Roth IRA at a 12% rate, using cash held outside the IRA to pay $5,400 in federal tax on each conversion. For married couples filing jointly in 2026, the 12% bracket covers taxable income from $24,801 to $100,800. Income above that threshold is taxed at 22%.

How 26.5 Sets Each Couple’s Tax Bill at 73

The IRS Uniform Lifetime Table assigns 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.

The converting couple ends up with about $387,000 remaining in the traditional IRA, which yields an RMD of roughly $15,000, less than half what their counterparts owe. Over 11 years of conversions, this couple moved $495,000 out of the traditional IRA and paid $59,400 in federal taxes to do it. That converted money grew to about $639,000 inside the Roth, where there are no future RMDs and qualified withdrawals come out tax-free.

Why Pension Income Makes the Bigger RMD Costlier

For the pension couple, the $39,000 RMD piles on top of income that already covers their living expenses. When pension and Social Security checks fully fund the household budget, the RMD becomes unnecessary income, and every dollar of it is taxable.

The math compounds over time. Social Security benefits increase annually, the RMD divisor shrinks each year, and the required withdrawal claims a growing share of the account. Once combined taxable income crosses $100,800, a portion of each RMD spills into the 22% bracket, raising the effective tax cost above what the converting couple paid a decade earlier.

What the Comparison Leaves Out

Whether converting pays off depends heavily on where tax rates land in the future. The converting couple locked in the 12% rate during their early retirement window. If the pension couple’s RMDs stay comfortably inside the 12% bracket throughout retirement, the $59,400 the converters sent to the IRS will have missed years of compounding inside the account. Conversions also raise reportable income in the year they occur, which can shrink Affordable Care Act subsidies and trigger higher Medicare premiums two years down the road.

The scenario above applies to people born from 1951 through 1959, who face their first RMD at 73 under SECURE 2.0. Anyone born in 1960 or later does not begin RMDs until age 75, gaining two additional years of tax-deferred growth. That longer runway pushes the traditional IRA balance even higher before the IRS mandates the first withdrawal, which means the stakes of the conversion decision are larger, not smaller.

Where to Focus Between 62 and 73

The two outcomes diverge entirely during the years between retirement and the first RMD notice. Three practical checks help a household decide which approach fits:

1. Estimate taxable income for each pre-RMD year and compare it with the $100,800 ceiling of the 12% bracket to find available room for conversions.
2. Pay conversion taxes with cash held outside the IRA so the Roth receives the full converted amount.
3. Project the first RMD using the 26.5 divisor and weigh it against expected pension and Social Security income to see whether the distribution is redundant.

The pension couple’s account crossed $1 million untouched. But the bill arrives at 73, when the IRS sets the required withdrawal and taxes it at the rate that applies to total income that year. The converting couple paid on their own schedule, at a rate they controlled. That single timing choice is what separates a $39,000 RMD from a $15,000 one, and a free guide here walks through how to reduce that first-year tax hit years before it arrives.

Editor’s note: The median and mean retirement account balances cited for households aged 55 to 64 have been updated to $239,000 and $670,200, respectively, reflecting the Federal Reserve’s 2025 Survey of Consumer Finances released in October 2026, replacing the 2022 survey figures previously cited.

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