Two Sisters Each Retire at 62 With $400,000 in an IRA and a $30,000 Pension. One Converts $35,000 a Year for 11 Years and Pays About $4,200 in Tax Each Year. The Other Pays Nothing Until 73, Then Owes Tax on a Balance Closer to $680,000 at Whatever Rate the IRS Sets

Picture two sisters who both retire at 62 with the exact same finances: $400,000 in a tax-deferred IRA and a $30,000 annual pension. This IRA exceeds the $257,002 average IRA balance Fidelity reported among Baby Boomers in its Q3 2025 analysis, so these two individuals have a few additional considerations to think through.

One sister moves an assumed $35,000 a year into a Roth IRA for 11 years. The other leaves the account alone until required minimum distributions (RMDs) begin. Under the 2026 federal tax brackets, the two plans produce different tax costs. The converting sister pays a known, modest rate today. The waiting sister takes on a larger bill later at a rate nobody can yet quote.

How a $35,000 Conversion Fills the 12% Bracket

Federal law includes any IRA distribution in gross income under 26 U.S.C. § 408(d)(1). IRS Publication 17 says a Roth conversion is not an exception to that rule. The converting sister therefore reports her pension plus the conversion, for a total of $48,900 of taxable income after the $16,100 standard deduction for single filers in 2026.

The 22% bracket starts above $50,400, so she remains $1,500 below it, especially if she converts $35,000 a year to remain within that range. Her total federal tax comes to $5,620, compared with $1,420 on the pension alone. The $4,200 difference is what each conversion costs her.

Over 11 years, she converts $385,000 for about $46,200 in tax at today’s brackets. Brackets adjust for inflation every year, so the exact dollar amount will drift. Using savings held outside the IRA to pay the tax lets the full $35,000 land in the Roth. (Those quiet years between stopping work and the first required withdrawal are the whole subject of our free Roth Window guide, which sizes up when conversions are cheapest.)

Why the Untouched IRA Grows Toward $680,000

The $680,000 figure assumes about 5% annual growth. At that rate, $400,000 compounds to about $684,000 over 11 years. For context, the 10-year Treasury yield was 5.2% on October 19, 2026. That makes 5% a reasonable assumption, though no return is guaranteed.

The RMD age is less settled than it looks. IRS Publication 590-B uses age 73, but the law sets the age at 75 for anyone who attains age 74 after December 31, 2032. This means that someone who is 62 in 2026 falls under that later age. With 13 years left to grow, the balance reaches about $754,000. Waiting longer simply gives the IRS a larger balance to tax later.

What the Waiting Sister Faces When RMDs Start

Her RMDs will sit on top of the $30,000 pension and Social Security. Social Security’s average retired-worker benefit is projected at $2,170 a month after the 3.6% COLA for 2027.

With all three income sources combined together, a large share of her withdrawals is likely to be taxed at 22% or more, compared with the 12% her sister paid. The required withdrawal also grows as a share of the balance each year. Missing one can bring a 25% excise tax.

She also cannot know her tax rate in advance. Today’s brackets come from the One Big Beautiful Bill, and Congress can rewrite them at any point before her first RMD. Her sister locked in 12% on every dollar she converted. The waiting sister will pay whatever schedule is in place when her withdrawals begin.

Where the Converting Sister Still Carries Risk

Eleven conversions do not empty the account. Because the remaining balance keeps compounding while she moves $35,000 a year, about $187,000 would still be in her traditional IRA at 73 under the same 5% assumption. Her RMDs will be smaller than her sister’s, but she will still have them.

The $4,200 math also assumes she has no other income. At 62, she earns no Social Security in this model. If she starts benefits early, that income stacks on top of the conversion and can push part of it into the 22% bracket. Tax paid early also cannot be recovered if rates later fall.

Steps That Decide Which Sister Comes Out Ahead

For a retiree with a modest pension and a six-figure IRA, three steps tend to settle the outcome:

1. Each year, compare projected taxable income with the $50,400 line where the 22% bracket begins for single filers, and size the conversion to remain under it.
2. Decide when to claim Social Security before setting conversion amounts, since benefits use up the same bracket space.
3. Pay the conversion tax from cash held outside the IRA, so the full converted amount goes into the Roth.

The converting sister pays about $4,200 a year at a rate she knows. The waiting sister postpones everything onto a larger balance taxed under rules Congress has not yet written. Which plan wins depends on returns and future tax law, but only the first sister knows what her plan will cost.

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