A Couple Who Converts $40,000 a Year From 62 to 73 Out of $650,000 Between Two IRAs Leaves the Kids a Roth They Empty Tax-Free. The Average Couple Converts $0 and Leaves the Same Kids a Ten-Year Tax Bill at Their Own Rates

Let’s imagine a scenario in which there are two married couples, each with $650,000 split between two traditional IRAs. One couple converts $40,000 a year into Roth IRAs starting at 62 and stops when required withdrawals begin at 73. The other couple converts nothing.

The two ways differ mainly in when the tax is paid while both spouses are alive. They split apart after both spouses die, when adult children inherit the accounts under federal rules that require most non-spouse heirs to empty them within 10 years.

Where a $650,000 Couple Sits Against Typical Savers

According to Fidelity, the average IRA balance for Baby Boomers is $257,002, while Transamerica’s survey puts median household retirement savings for Boomers at $270,000. A small number of very large accounts pull up the average. The median marks the middle household. By either measure, a couple with $650,000 holds well above the typical figure, giving them a meaningful tax decision to make.

Federal Reserve data shows how concentrated this money is by age. In the second quarter of 2026, households headed by people ages 55 to 69 held 49.5% of all defined-contribution retirement assets, about $8.5 trillion. Households 70 and older held 9.4%. A large share of the money sits with people who are still in the years before RMDs start.

How Conversion Years Before 73 Get Used

For anyone who turns 72 after December 31, 2022 and 73 before January 1, 2033, the applicable RMD age is 73. IRS Publication 17 notes that conversion amounts are includible in gross income in the year they are converted. Each $40,000 conversion therefore shows up on that year’s tax return.

In 2026, the 12% bracket for joint filers covered taxable income up to $100,800. If the full $40,000 lands in that bracket, the federal tax comes to $4,800 a year. Over the 11 tax years from age 62 to 72, that adds up to $440,000 converted for $52,800 in taxes,

Medicare surcharges stay out of reach at this level. For joint filers, the income-related Part B surcharge starts above $218,000. Below that line, the couple pays the standard premium of $202.90 a month. Roth owners also face no required distributions while they are alive, so the converted money can keep growing untouched.

What Heirs Owe When Parents Convert Nothing

The couple that skips conversions takes RMDs at 73 on top of Social Security. The estimated average benefit for an aged couple rises to $3,355 a month after the 3.6% cost-of-living adjustment for 2027. Whatever is left in the traditional IRAs then passes to the children.

Under 26 U.S.C. § 401(a)(9)(H)(i), designated beneficiaries fall under a 10-year rule. IRS Publication 590-B says that all distributions must be made by the end of the 10th year after death, with exceptions for qualifying beneficiaries such as spouses. Inherited traditional IRA distributions are taxed as ordinary income to the heir.

Suppose a child inherits $650,000 and withdraws it equally over 10 years. That adds $65,000 a year to the child’s income. Median weekly earnings for full-time workers were $1,232 in the third quarter of 2026, or about $64,064 a year. Together, that is $129,064 before deductions.

For someone filing alone in 2025, the 24% rate began at $103,351 of taxable income. So part of each withdrawal can be taxed at twice the rate the converting parents paid. A Roth heir still faces the same 10-year deadline, since certain distribution rules apply to Roth IRAs after the owner passes. The difference is that qualifying Roth distributions aren’t taxed. So the heir can empty the account in any year without adding to taxable income.

Assumptions That Change the Outcome

This comparison leaves out investment growth and state taxes, and it uses 2025 brackets. The IRS has since issued inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill. The converting couple also still holds about $210,000 in traditional IRA money at 73, plus whatever growth it has earned, and that portion is subject to RMDs.

If the children earn less than the parents, the advantage shrinks or reverses. A recent CNBC piece cited an advisor who said that, in some cases, the juice isn’t worth the squeeze. In a free guide we put together on Roth conversions, we focus on the window between a last paycheck and the first RMD and assess whether those low-tax years are worth using.

The heirs’ own earnings matter too. Key variables to track include where future bracket thresholds land, where the Medicare surcharge cutoffs move, and how those earnings compare with the parents’ retirement income. Those three factors determine which generation pays tax on IRA money, and at what rate.

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