Leave a $1 Million IRA to Kids in Their Peak Earning Years and the IRS Collects About $350,000. Convert It in Your 60s and the Same Money Is Taxed at 22%, Not 35%, Because Whose Bracket Pays Is a Choice
A traditional IRA feels like generosity until you see which tax bracket actually collects on it. The difference between leaving it alone and acting in your 60s can run well into six figures, and the deciding factor has nothing to…
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Most retirees think of their IRA as a gift to the kids. The tax code sees a deferred bill, and it lets you pick who pays it.
Leave a $1 million traditional IRA to two high-earning children and Washington can collect about $350,000. Convert the same money to a Roth in your 60s, at your lower rate, and the federal bill falls to about $220,000. The $130,000 gap comes down to one question: whose bracket takes the income.
Ten Years to Empty an Inherited IRA, at the Worst Possible Time
Children used to be able to stretch an inherited IRA over their own lives. Most heirs lost that option with SECURE Act. Under the 10-year rule, a non-spouse beneficiary has to withdraw the entire balance by December 31 of the year containing the 10th anniversary of the owner’s death, according to IRS Publication 590-B. If a parent died in 2025, the account has to be empty by December 31, 2035. If the parent had already started RMDs, the heirs also owe annual withdrawals along the way.
Every dollar that comes out counts as ordinary income, stacked on top of the heir’s salary. A parent who dies at 85 usually leaves the money to children in their 50s, the decade when paychecks peak.
How Two High-Earning Kids Hand the IRS $350,000
Take a example family. There are two children, each a single filer with $260,000 of taxable income in 2026. Each inherits half the IRA and withdraws $50,000 a year for ten years. To keep it simple, assume no growth and 2026 brackets the whole way.
For tax year 2026, the 35% bracket for single filers starts at $256,225 and the 37% bracket starts above $640,600. Each child’s taxable income rises to $310,000, so every inherited dollar lands at 35%. That comes to $17,500 a year per child, or $350,000 across both over the decade. Most states add their own income tax on top.
These heirs earn far more than most workers. Median usual weekly earnings for full-time workers were $1,251 in the second quarter of 2026, which works out to about $65,052 a year. Still, children of million-dollar savers often land in exactly this range.
Converting at 22% Over Nine Years Cuts the Bill to $220,000
Now go back to when the parents were 65, married and newly retired, and had them convert the IRA gradually. For 2026, the 22% bracket covers taxable income from $100,800 to $211,400 for couples filing jointly. With the $32,200 standard deduction, a couple can report up to $243,600 of gross income before reaching 24%.
Assume Social Security, a pension and investment income already bring their taxable income to $100,800. That leaves $110,600 of room each year at 22%, for a conversion tax of $24,332 a year. At that pace the full balance reaches the Roth in about nine years.
| Path | Whose Bracket | Rate | What $1 Million Owes in Federal Tax |
|---|---|---|---|
| Inherited traditional IRA | Two single children, $260,000 taxable each | 35% | $350,000 |
| Roth conversion in 60s | Married parents, joint return | 22% | $220,000 |
| Difference | $130,000 |
The kids then inherit a Roth. The 10-year rule still applies, but qualified distributions are tax-free, so heirs can let the money grow until year ten. Roth owners aren’t required to take distributions from your Roth IRA at any age while alive, per IRS Publication 17.
Why Your 60s Are the Cheapest Conversion Window
The window opens when paychecks stop and starts closing when RMDs begin. SECURE 2.0 set the starting age at 73 for those born on or after January 1, 1951, and includes a later increase to 75. When RMDs begin, the forced withdrawals fill your low brackets and leave less room to convert (we sized up that quiet gap between the last paycheck and the first RMD in a free Roth conversion guide here).
- Use a taxable account to cover the tax. Withholding it from the IRA shrinks what reaches the Roth.
- Fill a bracket, then stop. Only the dollars above the 22% ceiling get taxed at 24%.
- Start the Roth five-year clock early. Tax-free earnings require the Roth to be at least five years old, and heirs inherit that timeline.
When Leaving the IRA Alone Wins
The math reverses when your heirs earn less than you do. A child in the 12% bracket pays less on inherited withdrawals than you’d pay to convert. Charities pay no income tax at all, so IRA money set aside for charity should stay traditional.
Conversions come with side effects, too. Extra income can raise Medicare premiums two years later through IRMAA. Once you’re collecting Social Security, conversion income can make up to 85% of benefits taxable. State taxes can cut either way: parents converting in a high-tax state for kids who live in Florida or Texas may come out behind.
Estate tax rarely matters here. The 2026 basic exclusion is $15,000,000 per person.
Deciding whose bracket pays is worth working through with a tax professional who can run both paths on your real numbers.
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Vilma Rios is a tax professional and tax content contributor with more than 15 years of experience in tax and accounting. She specializes in federal tax research, tax education, and translating complex tax rules into clear, practical information for individuals, families, and small-business owners.
Vilma is a Content Tax Contributor II with the National Association of Tax Professionals (NATP), where she contributes to tax education and professional content. She has also presented tax information through webinars, including Spanish-language tax education, and has appeared on Telemundo 47 discussing tax topics and helping viewers understand important tax-filing requirements.
Her experience also includes tax and accounting work, tax research, IRS-related matters, and public tax education. While in college, Vilma volunteered in an IRS-sponsored tax assistance program and was recognized for her community service by local and state officials.
Known as “Your Tax Geek,” Vilma is passionate about making taxes easier to understand and helping people navigate an increasingly complex tax system.
