There's a reason higher earners don't always rush to save for a retirement in a Roth account. Once your income reaches a certain point, you may prioritize the up-front tax break that comes with funding a traditional IRA or 401(k) plan. If you're 50 or older this year, you're eligible to make catch-up contributions in your IRA or 401(k). And if you have a workplace plan, your preference may be to do that catch-up in a traditional 401(k). Where to invest $1,000 right now? Our analyst team just revealed what ...

Core Insights - The article discusses the considerations for converting a traditional IRA to a Roth IRA, particularly for individuals aged 65 with significant retirement savings, such as $1.2 million [1][2]. Group 1: Roth IRA Conversion Benefits - A Roth conversion allows for tax-free withdrawals and freedom from required minimum distributions (RMDs), which can help avoid higher tax brackets in retirement [4]. - Roth accounts can grow tax-free indefinitely and can be passed down to heirs, making them an attractive option for estate planning [4]. Group 2: Tax Implications of Roth Conversions - Converting a large amount, such as $1.2 million, in a single year can result in a substantial tax burden, potentially triggering the top federal tax rate of 37% plus state taxes [5]. - Partial Roth conversions can be a strategic approach to minimize tax liabilities by spreading the conversion over several years [2][5]. Group 3: Contribution Limits and Eligibility - There are no income limits for Roth conversions, unlike direct contributions to a Roth IRA, which are restricted based on modified adjusted gross income (MAGI) thresholds [4].