The Roth Conversion Mistake That Could Cost You Tens of Thousands — and How To Get It Right

Core Insights - Converting a 401(k) to a Roth IRA can be a beneficial strategy for tax-free growth and avoiding required minimum distributions (RMDs) [3][4] - It is advised to avoid converting the entire balance at once to prevent entering a higher tax bracket and increasing Medicare premiums [5][6] - Gradual conversions over several years can optimize tax liabilities and maintain lower tax brackets [6][7] Group 1 - Converting to a Roth IRA allows for tax-free growth and avoids RMDs, which can help reduce taxable income in retirement [3][4] - A full conversion of $1.6 million in one year could push an individual into the top tax bracket, leading to a tax rate as high as 37% [5][6] - Dividing the conversion into smaller amounts over several years can keep the individual in a lower tax bracket, potentially as low as 12% [6]