Should I Convert $140k a Year From My $1.4M 401(k) to Reduce RMDs and Taxes?

Core Insights - Transferring funds from a 401(k) to a Roth IRA can help retirement savers manage their future tax liabilities, especially if they expect to be in a higher tax bracket after retirement [2][4] - Roth IRAs do not have Required Minimum Distribution (RMD) rules, allowing funds to grow tax-free indefinitely, which can be beneficial for tax minimization and estate planning [5][4] - Gradual conversions of 401(k) funds to Roth IRAs can help spread out tax liabilities, making it a popular strategy among retirement savers [6][8] Roth Conversion Concepts - Tax-deferred accounts like 401(k) plans require withdrawals to be taxed as ordinary income and are subject to RMD rules after age 73 or 75 [4] - Converting to a Roth IRA allows individuals to avoid RMDs, thus potentially reducing their overall tax burden in retirement [5] - Immediate taxation on converted funds can lead to significant short-term tax bills, making gradual conversions a more appealing option [6] Hypothetical Scenarios - A 58-year-old with a $1.4 million 401(k) could convert $140,000 annually, resulting in a total taxable income of $240,000 and an annual tax bill of $49,814 [7] - At this conversion rate, it would take approximately 16 years to deplete the 401(k) account, with a total tax bill of $797,024, compared to a one-time tax bill of $507,784 for a full conversion in one year [8]