A 72-Year-Old Couple With $900,000 in IRAs Converts Nothing. Their Kids Inherit the Tax Bill Instead.

A 72-Year-Old Couple With $900,000 in IRAs Converts Nothing. Their Kids Inherit the Tax Bill Instead.

David Beren

Fri, August 28, 2026 at 9:37 PM GMT+3 5 min read

Quick Read

• Skipping Roth conversions at the 22 to 24 percent bracket passes the entire $900,000 tax burden to heirs who may face 32 to 35 percent rates on forced distributions.

• The SECURE Act's 10-year rule forces adult children to empty inherited IRAs within a decade, stacking mandatory distributions on top of peak salaries.

• Three questions decide the conversion calculus: the surviving spouse's future bracket, heirs' current tax rates, and whether outside funds exist to cover the conversion tax.

• Read More: Learn 7 ways to generate income with a $1,000,000+ portfolio (sponsor)

A 72-year-old couple sitting on $900,000 in traditional IRAs has a decision most retirees never make consciously. They can pay tax on that money now, at rates they know, over a decade or two of measured Roth conversions. Or they can pay nothing extra, take their required minimum distributions on schedule, and let the balance pass to their children under the SECURE Act's 10-year rule. The second option feels like the easy one. It also quietly hands the next generation the largest possible tax bill.

This article walks through what that trade actually looks like using current federal tax brackets, the IRS inflation adjustments for 2026, and the inherited IRA rules that took effect after 2019. The numbers are the evidence. The story is about who ends up paying.

Why $900,000 Is a Meaningful Threshold

According to Fidelity's Q3 2025 retirement analysis, the average IRA balance for a baby boomer participant comes in at $257,002. A couple with $900,000 spread across two IRAs is well above that typical mark. By estate tax standards, they are still a long way from the 2026 basic exclusion of $15,000,000, so that is not a concern. But they are holding enough pre-tax money that their required minimum distributions alone will keep pushing their taxable income higher every single year they live.

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Under SECURE 2.0, required minimum distributions begin at age 73 for this couple. Their Social Security check will also rise: the 2027 cost-of-living adjustment is tracking at 3.1%. Combined benefits, RMDs, and any pension or dividend income stack on top of each other. Once RMDs start, the couple loses control over how much taxable income they realize each year. The IRA dictates the schedule.

What a Roth Conversion Would Cost Today

For a married couple filing jointly in 2026, the standard deduction lands at $32,200. The 22% bracket covers taxable income up to $206,700 for joint filers, and the 24% bracket stretches all the way to $394,600. A couple with modest Social Security benefits and no wages could convert a decent chunk of their IRA each year and stay comfortably within that 22% or 24% range. Over a five to ten-year window, they could move most of that $900,000 into a Roth IRA at a predictable, mid‑bracket tax cost.

The reason to do it now is that the 22% and 24% brackets are wide, and the couple controls the timing. The reason not to do it is the check written to the IRS today. That is the actual trade.

What the Kids Inherit

When the surviving spouse dies, the traditional IRA passes to non-spouse beneficiaries. Under the post-2019 rules, adult children must empty the inherited IRA within 10 years. Every dollar withdrawn is taxed as ordinary income at the child's marginal rate, on top of the child's salary, spouse's income, and any bonuses.

Children in their 50s are typically in their peak earning years. A household already at $206,701 of taxable income is in the 24% bracket. Add $90,000 or $100,000 a year of forced IRA distributions, and the top slice lands in the 32% bracket at $403,550 or the 35% bracket at $512,450. The parents avoided a 22% or 24% conversion. The kids pay 32% or 35% of the same amount.

Opportunity Cost of Waiting

The interest-rate environment matters here in a specific way. The 10-year Treasury yield sits at 4.71%, and the federal funds target upper bound is 3.75%. Money used to pay conversion taxes today is money that will not compound in a bond ladder or money market. That is the real cost of converting. That is also why the calculation isn't automatic.

What tips the math for most households at this balance is the bracket differential between the parents and the children. A couple with $900,000 pretax and mid-earning heirs is usually the textbook case for staged conversions, the same window between retirement and RMDs we walked through in a free guide to timing Roth moves. A couple whose heirs earn less than they do is usually the case.

What This Couple Actually Faces

Three questions decide the outcome. First, what marginal bracket will the surviving spouse land in once one Social Security check disappears, and the standard deduction drops from $32,200 to $16,100? Second, what bracket are the children in today, and where will they be in their 60s? Third, is there taxable brokerage money outside the IRA to pay the conversion tax so the full conversion amount actually lands in the Roth?

Doing nothing is a choice with a price. Whoever inherits the account pays the price at whatever rates apply in the year they empty it. That is what the rules require.

A $1,000,000 Income Portfolio

If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.

Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)

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