Is Switching to Roth Contributions at 58 With $1M in a 401(k) a Good Move?

Core Insights - The decision to switch from a tax-deferred 401(k) to Roth contributions depends on individual circumstances rather than a universal recommendation [2] - Engaging with a financial advisor is suggested to navigate the complexities of retirement planning [2] Group 1: 401(k) Plan Overview - Contributions to a 401(k) are tax-deferred, meaning taxes are paid upon withdrawal, including investment gains [3] - Employer matching contributions can significantly enhance the value of 401(k) investments, providing an automatic gain [3] - Required minimum distributions (RMDs) must begin at age 73 (or 75 for those born after 1960), potentially increasing tax liabilities [4] Group 2: Roth IRA Characteristics - Roth IRA contributions are made with after-tax dollars, allowing for tax-free withdrawals after age 59½ and a five-year holding period [5] - Younger individuals benefit more from Roth accounts due to the potential for compounded returns over time [6] - Older workers, even at age 58, still have a significant investment horizon, making non-taxable accounts advantageous [7] Group 3: Contribution Limits and Income Restrictions - For 2024, the contribution limit for a Roth IRA is $7,000, with an additional $1,000 for individuals over 50 [8] - Modified adjusted gross income limits for Roth contributions are set between $146,000 to $161,000 for single filers and $230,000 to $240,000 for joint filers, with phase-out ranges for incomes in between [8] Group 4: Considerations for Retirement Planning - Factors influencing retirement savings decisions include current versus future tax situations, specifics of Roth options, and intentions regarding inheritance [9]