At 74, a $600,000 IRA and a $50,000 Roth Conversion Can Trigger Taxable RMDs First

A 74-year-old with a $600,000 IRA may think a $50,000 Roth conversion is simple, but federal ordering rules can change the plan before any money is moved.

Consider a 74-year-old who holds a $600,000 traditional IRA and wants to convert $50,000 to a Roth in the same year an RMD is due. The sequence matters because the rules require the RMD to be taken first, taxed as ordinary income, and excluded from the Roth entirely. That means a retiree who expected to focus on one $50,000 conversion can end up with more taxable income than planned.

How a $600,000 Balance Turns Into a $23,500 Withdrawal

An RMD is found by dividing the IRA balance from the previous December 31 by a life expectancy factor from the IRS Uniform Lifetime Table. For someone age 74, that factor is 25.5.

Applied to a $600,000 balance, that formula produces a required withdrawal of about $23,529, or roughly $23,500. IRS Publication 590-B says IRA owners must start taking RMDs by April 1 of the year after reaching age 73, so a 74-year-old is already subject to the annual requirement.

Why the RMD Comes Out First

The ordering rule is set out in Treasury regulation 26 CFR 1.408A-4, A-6(a), which says the first dollars distributed during the year are treated as the RMD until the full required amount has been distributed. Under A-1(c) of the same regulation, a conversion is treated as a distribution even when it is completed through a trustee-to-trustee transfer.

A conversion must also qualify as a rollover, and 26 U.S.C. § 402(c)(4)(B) excludes from that definition any amount required under section 401(a)(9). IRS Publication 17 states the point plainly: amounts that must be distributed from a traditional IRA for a particular year cannot be converted. If an RMD is moved into a Roth anyway, the regulation treats it as a regular contribution rather than a conversion contribution.

Taking Both Amounts Creates $73,500 of Taxable Income

If the year is handled exactly as intended, the retiree would take the $23,500 RMD and then convert $50,000, for a total of $73,500 leaving the traditional IRA. Under 26 U.S.C. § 408(d)(1), both amounts are included in gross income. Before any investment gains, the traditional IRA would then be reduced to about $526,500.

For 2026, single filers face a 22% bracket beginning above $50,400, and the 24% bracket starts above $105,700. The single standard deduction is $16,100, which lowers the amount of income exposed to the higher rates.

As a rough estimate, taxing the full $73,500 at 22% would generate $16,170 in tax. The RMD portion alone would account for $5,170 of that total, and that tax is owed whether or not a conversion occurs. The actual bill, however, depends on deductions and the lower tax brackets.

Social Security can also be affected. The average retired worker received $2,095 a month before the latest adjustment, or $25,140 a year. The regulation says conversion income is counted when determining how much of Social Security is taxable under section 86, so a conversion can increase the share of benefits subject to tax.

(This ordering rule is one of nine IRS quirks that can quietly drain retirement accounts, all shown in our free tax trap map.)

Medicare Costs Can Rise Later

Medicare's income-related surcharge, or IRMAA, is based on modified adjusted gross income from two years earlier, so income in one year can affect premiums two years later. The standard Part B premium for 2026 is $202.90 a month, and for single filers the surcharge begins above $109,000 of income.

Even if the full average Social Security benefit is added to $73,500, total income would be $98,640, which is still below that threshold. But a larger conversion that pushed income above it would add $81.20 a month to Part B, or $974.40 a year, plus $14.50 a month for Part D.

How Older Savers Fit Into the Bigger Picture

Households age 70 and older numbered 29,519,419 in the second quarter of 2026 and held 33.6% of U.S. household net worth, according to central bank distribution wealth data. These are broad national figures, so they do not show whether a $600,000 IRA is typical for a 74-year-old.

Possible Ways to Rework the Plan

The rules do leave some flexibility. Taking the RMD first can make room for a conversion later in the year. Someone who wants total withdrawals to remain at $50,000 could take the RMD and convert $26,500 instead, which moves less money into the Roth but keeps taxable income closer to the original target.

Two numbers will be important going forward. Social Security's 3.6% 2027 inflation adjustment lifts the projected average retired-worker benefit to $2,170, which would add to future taxable income. The IRMAA thresholds tied to 2026 income have not yet been announced. In addition, each year's RMD rises as a share of the account balance because the divisor falls to 24.6 at age 75.