At 75, Two Retirees With the Same $900,000 Face Very Different IRS Consequences

Two retirees begin retirement at 62 with the same 401(k) balance and the same assumed rate of growth, yet a single early decision sends them into entirely different tax outcomes by age 75.

Two married retirees, both 62, each have about $422,000 in a traditional 401(k). One intends to leave the account alone, while the other plans to shift every dollar into a Roth before required withdrawals begin.

If both accounts grow at 6% a year, each could reach roughly $900,000 by age 75. But only one retiree would then owe a mandatory withdrawal of about $36,600. The other would already have paid the tax and moved the money outside the IRS withdrawal rules.

The reason age 75 matters is that, under current law, people born in 1960 or later begin taking required minimum distributions at that age. Both retirees in this example fall into that category.

One $900,000 Balance, Two Very Different IRS Outcomes

For the couple keeping the traditional account, the first RMD is calculated by dividing the prior year-end balance by 24.6, the Uniform Lifetime Table factor for age 75. On $900,000, that works out to $36,585. That is only the first year’s amount; as the factor declines each year, the required withdrawal rises.

The Roth couple, by contrast, would not be forced to take any distribution. Current IRS rules do not require minimum withdrawals from Roth 401(k)s or Roth IRAs during the original owner’s lifetime.

How a Conversion at 62 Changes the Tax Picture

Assume the Roth retiree and spouse have no other income in 2026. Converting the full $422,000 traditional balance would create about $78,748 in federal income tax for the couple.

After the $32,200 standard deduction, the highest portion of the conversion would fall into the 24% bracket.

Age also matters because Medicare’s IRMAA surcharge, or income-related monthly adjustment amount, is based on income from two years earlier. Income at 63 affects premiums at 65, which means a conversion at 62 would not trigger a Medicare surcharge.

By contrast, a large conversion at 70 could push both spouses into one of Medicare’s highest premium brackets two years later. At 2026 rates, that could mean paying as much as $649 a month each for Part B instead of the standard $203.

In this example, the Roth retiree pays the tax out of a brokerage account, allowing the full $422,000 to compound inside the Roth. The traditional retiree keeps that $78,748 invested instead. At 6%, it grows to roughly $168,000 by age 75, before tax on the gains. That means the traditional retiree has more total money at 75, even though taxes are still owed on the 401(k).

Paying $78,748 Now Versus Facing RMD Taxes Later

At 75, assume each couple receives the average Social Security benefit for an aged couple today, or $3,208 a month, equal to $38,496 a year.

For the couple with the traditional account, the RMD plus half of their Social Security benefits pushes them above the $44,000 adjusted base amount for joint filers. As a result, $16,058 of their Social Security becomes taxable.

Using 2026 tax brackets and the standard deduction for a married couple over 65, the traditional household would owe about $1,714 in federal income tax. Under the same assumptions, the Roth household would owe nothing. Half of their Social Security benefits stays below the $32,000 base amount, so none of it is taxable.

The effect appears in small increments. Once a couple is in the 85% Social Security tax zone, every extra $1,000 of RMD makes another $850 of benefits taxable. That translates to an effective marginal rate of 18.5% in the 10% bracket and 22.2% in the 12% bracket.

Converting the entire account in one year comes with a sizable upfront cost. The Roth retiree pays $78,748 now to avoid future mandatory withdrawals. But comparing that amount with a single year’s tax bill ignores the growth of both accounts and the taxes the traditional 401(k) owner will eventually face.

Breaking the conversion into several years may allow more of the money to stay in lower tax brackets. The years between the last paycheck and the first RMD often create some of the best opportunities to do that.

What a Roth Can Offer at 75: Flexibility

The Roth couple can decide how much to withdraw each year. They can take nothing after a market decline, or withdraw $60,000 for a new roof without coming close to the $218,000 joint IRMAA threshold or making Social Security taxable.

The advantage can become even clearer if one spouse dies. The survivor usually files as single, with Social Security tax thresholds of $25,000 and $34,000 and a lower Medicare surcharge threshold. A large traditional balance can become more expensive to draw down, while a Roth offers more flexibility without adding taxable income.

Three Steps to Take Before the Window Closes

1. Confirm your RMD age. If you turn 74 after 2032, your RMDs begin at 75. At 62, that leaves 13 tax years to convert before the IRS sets the withdrawal requirement.
2. Think about converting more before Medicare’s two-year income lookback begins affecting premiums at 65. Under 2026 rules, the first surcharge starts above $218,000 for joint filers or $109,000 for singles.
3. Run the numbers for the surviving spouse. Divide the projected traditional 401(k) balance at 75 by 24.6 and see how the resulting withdrawals would affect a single filer’s taxes and Medicare premiums. Then compare that future cost with the tax on conversions now.