Roth conversions may suddenly seem like a bad idea, but here’s why retirees are still considering them

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Roth conversions may suddenly seem like a bad idea, but here’s why retirees are still considering them


When you convert funds from an IRA or 401(k) to a Roth account, you have to pay income tax.
When you convert funds from an IRA or 401(k) to a Roth account, you have to pay income tax. – Getty Images

With investment accounts about to end a very good year and current tax rates unlikely to change for a while, the case for paying taxes now to convert traditional IRAs and 401(k)s to Roth accounts is hard to make.

Yet one financial-advice platform, Boldin, saw a 128% rise in the use of its Roth conversion calculator in 2024 over the previous year.

Boldin, formerly known as NewRetirement, hears from all sorts of users who saved well in tax-deferred accounts during their working careers and now, as they approach retirement, see looming required minimum distributions as a problem.

“It’s dawning on them,” said Steve Chen, Boldin’s chief executive. “Most of our users are 401(k) millionaires who are 50-plus, and they are starting to be aware that it isn’t just about returns — it’s where your money is located.”

Required minimum distributions are the IRS’s version of delayed gratification. You can put aside money each year that grows tax-free in qualified accounts while you are working, but at some point, you have to start paying tax on that money. Right now, that point comes at age 73, but in 2033 it will shift to 75. There’s a formula the government applies based on your age and account balance to determine how much you must take out.

The problem for 401(k) millionaires who are in their 50s (or younger) is that over the 20 years or so before they have to start taking money out, they may amass $4 million with compounded growth, at even a modest growth rate. That would mean an RMD of at least $150,000, which counts as taxable income. With Social Security and other taxable investment gains — along with wages, for those who are still working at age 73 — that will push them into higher tax brackets than they might have assumed they would be in. In addition, they will likely end up paying IRMAA surcharges on Medicare premiums.

If you are likely to take out more than you are required to from your qualified retirement accounts each year for living expenses, then you won’t generally be mad about your RMDs, and Roth conversions aren’t for you. If you’re worried that your nest egg won’t last through your lifetime, then contemplating whether to tax now or tax later isn’t worth your time.



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