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Leaving $650,000 in IRAs untouched for 11 years grew the balance to $1.11 million, forcing a $42,000 first-year RMD on top of pension income.
The couple missed 11 years of Roth conversion opportunities at the 12% rate, pushing RMD dollars into the 22% bracket instead.
When one spouse dies, the survivor files under single brackets where the 22% rate starts at $50,400, making the same RMD far more costly.
Two retirees, same $1 million, same 4% rule, buy one finished with $1.4 million, the other hit $0 in 12 years.Our free reader guideexplains the flaw that separated them, and the income-first method built to avoid it.
Let's start by considering a couple retiring at 62.
His pension covers the mortgage, the groceries, the property tax, and the trip to see the grandkids twice a year.
Two traditional IRAs, hers and his, hold a combined $650,000 on the day they stop working, and they never take a distribution.
Now imagine that eleven quiet years have passed, and then the first required minimum distribution letter arrives, followed by a second, and the number attached to those letters is larger than either of them planned for.
Leaving them untouched often costs more than it saves.
Required distributions from a traditional IRA now begin at age 73 under SECURE 2.0 for anyone born between 1951 and 1959.
The amount is calculated by dividing the prior year-end balance by a life expectancy factor from the IRS Uniform Lifetime Table.
Assume the $650,000 grew at roughly 5% a year for eleven years.
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