Couple Pays $60,000 to Convert $250,000 to Roth Before 40% Retirement Tax Hit
Updated
Updated · Yahoo Finance · Sep 14
Couple Pays $60,000 to Convert $250,000 to Roth Before 40% Retirement Tax Hit
2 articles · Updated · Yahoo Finance · Sep 14
Summary
$60,000 in federal tax let a 63-year-old couple move roughly $250,000 from a traditional 401(k) into a Roth, aiming to lock in a 22% to 24% rate now.
A $1.5 million 401(k) growing at 6% could roughly double by age 73, when Required Minimum Distributions begin and the first withdrawal alone could approach six figures.
Those RMDs, layered on top of two Social Security checks, could push much of their income into the 24% bracket, make up to 85% of benefits taxable and lift the next-dollar marginal rate toward 40% once IRMAA surcharges apply.
Paying the conversion tax from a taxable brokerage account preserves the full Roth balance for tax-free growth, while the Roth avoids future RMDs for the original owners and can pass to heirs under a 10-year tax-free window.