I'm 62 With $850k in My 401(k). Is It Too Late for a Roth Conversion?

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You tin execute a Roth conversion astatine immoderate age, and perchance boost your status income. However, this strategy often produces much affirmative results the sooner it’s done. One crushed is that you person to wage taxes connected converted funds astatine the clip of the conversion. After all, wealth sent to the IRS can't beryllium invested and grown. Roth conversions whitethorn marque the astir consciousness if you expect to beryllium successful a little taxation bracket aft retirement, arsenic good arsenic if you program to permission status savings to immoderate heirs arsenic portion of your property plan. Ultimately, whether converting a 401(k) astatine 62 is your champion determination depends connected your idiosyncratic circumstances beyond conscionable the magnitude successful it.

A financial advisor tin assistance you measure your options.

If you’re 62 and person $850,000 successful a 401(k), earlier committing to a Roth conversion, you'll privation to see respective factors. Among different things to deliberation astir are your existent income, erstwhile you program to discontinue and however overmuch your income volition beryllium successful retirement.

Let's accidental you presently person $100,000 successful taxable income, are azygous and volition discontinue astatine 66. If you person the full 401(k) now, your taxable income for this twelvemonth volition adjacent $950,000, including $850,000 successful converted funds positive $100,000 successful different taxable income. This volition enactment you successful the 37% marginal income taxation bracket, with an income taxation measure of astir $304,284, arsenic calculated by SmartAsset's Federal Income Tax Calculator.

If you usage immoderate of the converted funds to wage taxes, that wealth won't beryllium disposable for tax-free maturation for 4 much years. Of course, you'll inactive person $545,176 successful your Roth relationship aft deducting taxation payments. Four years of 7% yearly maturation from investing that volition nutrient a equilibrium of $714,615, according to SmartAsset's Investment Return & Growth Calculator.

Now let's look astatine the script of not converting. In 4 years, assuming 7% mean yearly growth, your $850,000 401(k) equilibrium volition person accrued to $1,114,177. That's $399,562 much than you would person aft converting.

However, you besides person to see taxes connected your income successful retirement. Start with Social Security. Assuming you assertion astatine property 66, those benefits are apt to beryllium $40,560 a year, according to SmartAsset's Social Security Calculator.

Now adhd 401(k) withdrawals. At the 4% harmless withdrawal rate from a $1,114,177 balance, you'll instrumentality retired astir $44,567 successful the archetypal twelvemonth of retirement. (RMDs won't beryllium a origin since you're already withdrawing much than the scheduled RMD amount.)