I'm 62 With $900k in My 401(k). Should I Move $90k Per Year to a Roth IRA to Minimize Taxes and RMDs?

Core Insights - The article discusses the implications of Required Minimum Distributions (RMDs) for pre-tax retirement accounts and the potential benefits of converting to a Roth IRA to avoid taxes and RMDs in retirement [1][6][23] Group 1: Required Minimum Distributions (RMDs) - RMDs are mandatory withdrawals from pre-tax retirement accounts starting at age 73, calculated based on the account's value and the account holder's age [2][6] - Withdrawals from pre-tax portfolios are taxed as ordinary income, meaning the entire withdrawal amount is subject to income tax rates rather than lower capital gains rates [3][6] Group 2: Roth IRA Conversions - Converting to a Roth IRA can eliminate RMD requirements and taxes on withdrawals, making it an attractive option for many households [5][7] - Roth conversions require paying upfront taxes on the converted amount, which can significantly increase taxable income for the year of conversion [9][10] Group 3: Tax Implications of Conversions - For example, converting a $900,000 401(k) to a Roth IRA could raise an individual's taxable income from $75,000 to $975,000, resulting in a substantial tax liability [10][11] - Staggered conversions, where smaller amounts are converted over time, can help manage tax brackets and reduce overall tax liability compared to a lump-sum conversion [14][15][16] Group 4: Considerations for Conversion - The decision to convert should consider long-term savings versus upfront conversion taxes, especially as individuals approach retirement [18][23] - While a Roth IRA can provide tax-free growth and withdrawals, the timing of the conversion is crucial to maximize benefits and minimize tax burdens [22][26]