Should I Convert 20% of My IRA to a Roth Each Year to Reduce Taxes and RMDs?

Core Insights - Transferring funds from a pre-tax retirement account to a Roth IRA can provide benefits such as avoiding required minimum distributions (RMDs) and taxes on withdrawals in retirement [1][2] - Gradual conversion of IRA funds to Roth accounts is a common strategy to save on taxes now while allowing for tax-free withdrawals later [1][4] - The decision to convert should consider the retiree's expected tax bracket post-retirement, as converting when in a higher tax bracket may not be beneficial [3] Roth Conversion Rules - Roth accounts are exempt from RMD rules, allowing retirees to avoid mandatory withdrawals that could increase tax liability [2] - Withdrawals from Roth accounts are tax-free after age 59 1/2, which does not affect Social Security benefit taxation [2] - Roth accounts facilitate tax-deferred wealth transfers to heirs, making them advantageous for estate planning [2] Conversion Techniques - Converting a large IRA all at once can lead to significant tax burdens; therefore, gradual conversion is often recommended [4] - Spreading conversions over multiple years can help avoid higher tax brackets and reduce overall tax liability [4] - The focus should be on the dollar amount converted each year rather than a fixed percentage, as this directly impacts current taxes [5]