I'm 64 With $650K in an IRA. Is Now the Right Time to Start Roth Conversions?

Core Insights - The article discusses the benefits of converting pre-tax retirement savings into Roth assets to minimize tax impacts during retirement and avoid required minimum distributions (RMDs) [1][7]. Tax Impact of RMDs - Individuals with traditional IRAs or 401(k)s must start withdrawing funds after age 73, which can lead to higher tax brackets due to additional income from RMDs [3]. - For instance, a $650,000 IRA growing at 7% could reach approximately $1.37 million by age 75, resulting in an RMD of around $95,000, potentially pushing a retiree into a higher tax bracket [4]. Roth Conversions - Converting a traditional IRA to a Roth IRA allows for tax-free growth and helps avoid RMDs, which can be beneficial for tax planning [6][7]. - However, a large conversion, such as a $650,000 IRA, can lead to a significant tax bill in the conversion year, potentially increasing the tax rate to 37% for single filers and resulting in an estimated tax liability of $193,000 [8].