Why Retired Couples With a $60,000 Pension, $40,000 in Social Security and $1 Million in an IRA May Want to Use the 12% Tax Bracket Now

A pension and Social Security can create a hidden tax problem that can shrink a $1 million IRA before it ever reaches heirs, and many retirees do not notice it until their chance to respond has passed.

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The usual retirement advice is to leave the IRA untouched until the IRS requires withdrawals. That approach defers taxes, allows the account to grow, and lets retirees take only what they need. For many households, that remains a smart strategy.

But for a married couple receiving a $60,000 pension, $40,000 in Social Security and holding $1 million in a tax-deferred retirement account, the tax rules point in a different direction. In 2026, that couple could convert about $54,300 to a Roth IRA while staying in the 12% federal bracket. If they postpone the move, those dollars are likely to face a 22% rate or higher, before Medicare-related surcharges are even considered.

The 2026 Return Leaves $54,300 of the 12% Bracket Unused

Take an example of a married couple, both older than 65, filing jointly with no other income and claiming the fixed IRS deductions for tax year 2026.

One way to think about a tax bracket is as a bucket you fill. For joint filers in 2026, the 12% bracket runs from $24,800 to $100,800 of taxable income. Any room left in that bucket during the year cannot be saved for later.

Under Section 86, provisional income equals the pension plus half of Social Security. In this case, that figure is well above the $44,000 adjusted base amount for joint returns, so the taxable portion of their benefits has already reached the 85% maximum.

Because that cap is already reached, an additional conversion dollar does not make more Social Security taxable. Converting the full $54,300 would generate $6,516 in federal tax, exactly 12%.

The couple’s MAGI would rise to $148,300, still below the $150,000 joint threshold where the senior deduction begins to phase out. It would also remain well under the $218,000 joint IRMAA line. Since IRMAA looks back two years, 2026 income affects 2028 premiums. At this level, both spouses would still pay the standard Part B rate.

RMDs and the Survivor Tax Hit Can Push Those Dollars Into 22%

Required minimum distributions start at age 73, or age 75 for people born in 1960 or later. At 73, the Uniform Lifetime divisor of 26.5 turns $1 million into an initial RMD of roughly $37,700. With continued growth, that account balance would likely be larger by then.

The larger danger comes after one spouse dies. The survivor then files as single, and the single filer 22% bracket begins at $50,400, half of the joint threshold.

If the surviving spouse keeps the full pension, the larger $24,000 Social Security benefit and a $40,000 RMD, taxable income would land close to $99,000. That means each RMD dollar would be taxed at 22%. Because that income also reduces the senior deduction, the $40,000 RMD would cost about $9,328 in federal tax, compared with $4,800 at 12%.

The survivor’s MAGI would also move above the $109,000 single IRMAA threshold. Part B would increase from $202.90 to $284.10 a month, plus a $14.50 Part D surcharge, adding roughly $1,148 a year. The opportunity may not last long either, since the $6,000 senior deduction is scheduled to end after 2028.

Ways to Use the Bracket Without Going Over

1. Make the conversion in December. By then, the year’s income picture is clearer. Since conversions cannot be undone, leaving a little room below the limit is wise.
2. Use cash from outside the IRA to pay the tax. Paying from the retirement account leaves less money to transfer into the Roth.
3. Review state taxes. Some states tax conversions fully, while others exempt part of retirement income or impose no income tax at all.
4. Understand the five-year rules. Owners over 59½ do not owe a penalty on converted money. Roth earnings become tax-free after the account has been open for five years.
5. Repeat the process annually. Doing a $54,300 conversion each year until RMDs begin can shift a substantial share of the $1 million into the Roth at 12%.

Who May Not Benefit From This Plan

Deferral still makes sense for some families. That includes couples expecting to move from a high-tax state to a state with no income tax, those planning major charitable giving through qualified charitable distributions, households whose heirs will be in low brackets, and anyone who lacks outside cash to cover the tax bill on a conversion.

Because conversion amounts depend on pension income, survivor benefits and state tax rules, it is wise to review the numbers with a CPA before each December deadline. The low-tax years between the final paycheck and the start of required minimum distributions are the focus of our free Roth Window guide, which examines how much of that gap is worth using.