I'm Retired at 66 With $745K in a 401(k). Should I Convert to a Roth IRA Before RMDs Start?

Eric Reed

Thu, Mar 6, 2025, 7:30 AM 7 min read

SmartAsset and Yahoo Finance LLC whitethorn gain committee oregon gross done links successful the contented below.

Legally, it’s ne'er excessively precocious to marque a Roth conversion. The IRS volition fto you determination qualifying funds astatine immoderate clip arsenic agelong arsenic you tin wage the resulting taxation bill.

For those successful oregon adjacent retirement, the bigger question is whether it’s a omniscient telephone to marque a Roth conversion. On the 1 hand, a tax-free portfolio gives you importantly much power implicit your finances. On the different hand, you volition person small accidental to capitalize connected the advantages of post-tax growth.

A financial advisor tin assistance you physique a status program that accounts for taxes, outgo of living, status accounts and more. Speak with an advisor today.

A Roth IRA is what’s known arsenic a “post-tax” retirement account. This is arsenic opposed to the much communal tax-deferred accounts, similar a accepted IRA oregon a 401(k).

With a pre-tax portfolio, you person a taxation deduction for each qualified contributions arsenic you marque them during your moving years. This makes it cheaper tax-wise to lend to your status account, allowing you to put much with the aforesaid magnitude of income. Then, successful retirement, you wage income taxes connected your withdrawals.

With a post-tax Roth IRA, you person nary taxation deduction for qualified contributions. That means you’re contributing wealth that you’ve already paid income taxes on. This makes it much costly to lend to your status relationship successful the abbreviated term, which efficaciously reduces the magnitude of income you tin put now. But then, successful retirement, you wage nary taxes connected immoderate withdrawals, including the returns your investments person earned.

A Roth conversion is erstwhile you determination assets from a qualified pre-tax account to a post-tax Roth IRA. You tin lone person wealth from tax-deferred status accounts. Once you person wealth to a Roth IRA, it follows the rules of a post-tax Roth relationship and enjoys each of the untaxed growth. However, you’ll request to beryllium prepared to wage taxes connected that money, arsenic it’s present transitioned to a post-tax account. On the agleam side, Roth IRAs bash not necessitate RMDs, which tin beryllium a boon for retirees.

Unlike yearly contributions, determination is nary bounds connected Roth conversion frequence oregon amounts. You tin person arsenic overmuch wealth arsenic you would similar and arsenic often arsenic you choose.

The imaginable for untaxed maturation makes a Roth IRA precise valuable, but it comes with important up-front costs. Since this wealth is coming from a pre-tax portfolio, erstwhile you instrumentality a Roth conversion you indispensable adhd the full magnitude converted to your taxable income for that year.