I'm 62 With $1.6M in a 401(k). Does Converting $160K a Year to a Roth Reduce RMDs?

Core Insights - Converting a 401(k) to a Roth IRA can help avoid Required Minimum Distributions (RMDs), which is a valid tax planning strategy [1][7] - However, for individuals nearing retirement, the tax costs associated with the conversion may outweigh the benefits of avoiding RMDs, potentially leading to a net loss [2] Group 1: Understanding RMDs - RMDs are mandatory withdrawals from pre-tax retirement accounts starting at age 73 (or 75 from 2023) [4] - The amount of RMD is determined by the portfolio's value on January 1 and the account holder's age, with a penalty of 25% for not withdrawing the required amount [5] - Ordinary income taxes apply to RMDs, which can be problematic for those with other income sources or multiple retirement accounts [6] Group 2: Roth Conversions - A Roth conversion involves transferring funds from a pre-tax retirement account, like a 401(k), to a post-tax Roth IRA [8] - The conversion process is straightforward, requiring the opening of a Roth IRA and transferring assets from the pre-tax account, either directly or through a personal withdrawal [9]