Roth Conversions Cut IRA Tax Drag Before RMDs Begin at 73

A large traditional IRA can generate three separate tax bills — for the owner, the surviving spouse, and the children who inherit it.

A $2.3 million traditional IRA can grow into a $3 million balance that produces a first-year required minimum distribution of roughly $122,000, stacking taxable income on top of Social Security and investment earnings.

"The real problem isn't the balance — it's assuming planning is finished once the account is funded," said Ethan M. West, CPA at Madrona Financial & CPAs.

West's example: a couple at 64 who maxed out 401(k)s for three decades and rolled everything into IRAs at retirement. By 75, their RMD of about $122,000, plus $65,000 in combined Social Security and $45,000 of investment income, produces $232,000 of reportable income — far more than they need, and none of it optional.

The tax bill doesn't stop with the owner. A surviving spouse filing alone faces the "widow's penalty," adding $10,000 to $15,000 in annual tax, while children inheriting roughly $1.5 million each can owe $150,000 or more in additional taxable income during their peak earning years.

RMDs Push Retirees Into Higher Brackets

RMDs begin at age 73 or 75 depending on birth year, per SECURE 2.0, which moves the starting age to 75 in 2033 for those born after 1959. Once distributions start, the money adds to taxable income whether the retiree needs it or not. For a couple with John and Jane's numbers, income taxed at 12 percent or 22 percent while filing jointly lands at 24 percent or 32 percent once a spouse files alone, even though income hasn't moved. The bracket and deduction squeeze alone can cost $10,000 to $15,000 more in tax every year for the rest of the surviving spouse's life.

The 10-Year Inherited IRA Clock

Under rules in place since the SECURE Act, most nonspouse beneficiaries must empty an inherited IRA within 10 years of the original owner's death. Withdrawals don't have to be even, but if the original owner was already taking RMDs, annual withdrawals are typically required throughout that window. For a child in peak earning years, the inherited IRA arrives as $150,000 or more of additional taxable income stacked on top of a salary and bonus. John and Jane spent 30 years deferring tax on that money, and their children may pay more on it than they ever would have.

The Planning Runway Before RMDs Start

Two recent changes make this the right moment to plan. SECURE 2.0 pushed RMD ages to 73, moving to 75 in 2033, giving people born after 1959 a longer runway. The One Big Beautiful Bill Act made current tax brackets permanent, removing the uncertainty that once hedged Roth conversion advice.

A Roth conversion taxes every converted dollar at today's rate while income is relatively low, instead of at a future rate stacked on top of Social Security, RMDs and investment income. A smaller traditional IRA means smaller future RMDs, less pressure on a surviving spouse's return and less taxable income passed to children.

For the charitably inclined, a qualified charitable distribution lets IRA owners send money directly from the IRA to a qualified charity — up to $111,000 per person in 2026 — and that amount counts toward the RMD without showing up as taxable income.

Neither move is automatically right for everyone. The goal isn't converting for its own sake, it's optimizing the tax bill across a lifetime. Running the numbers every few years matters more than picking a tactic, since today's right answer may not be right in five years.

IRAs hold 39 percent of all U.S. retirement-market assets, according to the Investment Company Institute, with 44 percent of American households owning one. The 2026 contribution limit is $7,500, plus a $1,100 catch-up for those 50 and older. For savers who did everything right, the accumulation phase is only half the job — the distribution phase, and the tax bills it triggers, needs the same discipline. Figures cited reflect rules and limits as of 2026; readers should verify against the latest IRS announcements before acting.

This article is for informational purposes only and does not constitute investment advice.