The Social Security Administration now projects insolvency for its OASI Trust Fund by late 2032, after spending has accelerated under the One, Big Beautiful Bill Act. That means something will have to give over the next seven years. The government could trim benefits, raise the retirement age for benefits, raise taxes — or likely a combination of all three. Trending Now: Social Security’s Biggest Lie — Why ‘Full Retirement Age’ Isn’t What You Think Consider This: 6 Popular SUVs That Aren't Worth the Cost ...

Core Insights - Converting retirement funds from a 401(k) to a Roth IRA allows for tax-free growth and withdrawals, while avoiding Required Minimum Distribution (RMD) rules, but incurs a significant upfront tax bill [2][4][5] - Gradual conversions can mitigate the tax burden by keeping individuals in lower tax brackets, potentially resulting in lower overall tax payments compared to a lump-sum conversion [5][6] Summary by Sections Roth Conversion Benefits - Roth conversions enable tax-free investment earnings and withdrawals, providing better control over retirement funds due to the absence of RMD rules [4] - Funds in a 401(k) are subject to federal and possibly state taxes upon withdrawal, creating a tax burden for retirees [3] Tax Implications - The upfront tax bill for converting a sizable 401(k) can be substantial, potentially pushing earners into higher tax brackets [5] - For instance, a single earner making $100,000 in the 22% tax bracket could face a one-time tax bill of approximately $177,000 when converting a $500,000 401(k) [5] Gradual Conversion Strategy - Gradual conversions can help manage tax consequences, allowing individuals to convert amounts that keep them in lower tax brackets [6] - A single earner could convert up to $91,950 in a year, resulting in a one-time tax bill of about $36,000, which is more manageable than a lump-sum conversion [6] - Over a seven-year period, this strategy could lead to a cumulative federal tax bill of approximately $153,000, saving about $10,000 compared to a one-time conversion [6]