I'm 62 With $1.6 Million in My 401(k). Should I Convert to a Roth IRA to Avoid RMDs?

Converting your 401(k) to a Roth IRA can allow you to avoid required minimum distributions (RMDs) on the converted assets during your lifetime. However, just because it’s permitted does not necessarily mean it’s in your long-term best interest. Particularly for households approaching retirement, a Roth conversion may result in a net loss. Put another way, there’s a chance that the tax costs of making those conversions will end up outweighing the tax benefits of avoiding RMDs.

For help weighing your options, consider matching with a fiduciary financial advisor who can help you determine what makes sense for your situation.

What Are RMDs?

The age when you must begin taking RMDs depends on your birth year. People born from 1951 through 1959 generally begin at age 73, while those born in 1960 or later generally begin at age 75. The IRS requires you to begin taking regular, minimum withdrawals, or RMDs, from pre-tax retirement accounts such as traditional IRAs and, subject to certain exceptions, workplace retirement plans such as 401(k)s.

The exact amount of an RMD is based on your age and the portfolio’s total value on Dec. 31 of the previous year. You have until the end of each year to make the withdrawal, meaning you can take your RMD in any amount at any time by or before December 31. The one exception is your first RMD, which can be delayed until Apr. 1 of the following year. If you don’t take your minimum distribution, the IRS charges a tax penalty, which is typically 25% of the amount not withdrawn (10% if corrected within two years).

Plan ahead for taxes and cash flow with SmartAsset’s RMD Calculator. Get a quick estimate of your required withdrawals so you can make informed financial decisions.

Required Minimum Distribution (RMD) Calculator

Estimate your next RMD using your age, balance and expected returns.

Quickly estimate your RMDs and when to take them

RMD Amount for IRA(s)

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RMD Amount for 401(k) #1

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RMD Amount for 401(k) #2

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About This Calculator

This calculator estimates RMDs by dividing the user's prior year's Dec. 31 account balance by the IRS Distribution Period based on their age. Users can enter their birth year, prior-year balances and an expected annual return to estimate the timing and amount of future RMDs.

For IRAs (excluding Roth IRAs), users may combine balances and take the total RMD from one or more accounts. For 401(k)s and similar workplace plans*, RMDs must be calculated and taken separately from each account, so balances should be entered individually.

^*The IRS allows those with multiple 403(b) accounts to aggregate their balances and split their RMDs across these accounts.

Assumptions

This calculator assumes users have an RMD age of either 73 or 75. Users born between 1951 and 1959 are required to take their first RMD by April 1 of the year following their 73rd birthday. Users born in 1960 and later must take their first RMD by April 1 of the year following their 75th birthday.

This calculator uses the IRS Uniform Lifetime Table to estimate RMDs. This table generally applies to account owners age 73 or older whose spouse is either less than 10 years younger or not their sole primary beneficiary.

However, if a user's spouse is more than 10 years younger and is their sole primary beneficiary, the IRS Joint and Last Survivor Expectancy Table must be used instead. Likewise, if the user is the beneficiary of an inherited IRA or retirement account, RMDs must be calculated using the IRS Single Life Expectancy Table. In these cases, users will need to calculate their RMD manually or consult a finance professional.

For users already required to take an RMD for the current year, the calculator uses their account balance as of December 31 of the previous year to compute the RMD. For users who haven't yet reached RMD age, the calculator applies their expected annual rate of return to that same prior-year-end balance to project future balances, which are then used to estimate RMDs.

This RMD calculator uses the IRS Uniform Lifetime Table, but certain users may need to use a different IRS table depending on their beneficiary designation or marital status. It's the user's responsibility to confirm which table applies to their situation, and tables may be subject to change.

Actual results may vary based on individual circumstances, future account performance and changes in tax laws or IRS regulations. Estimates provided by this calculator do not guarantee future distribution amounts or account balances. Past performance is not indicative of future results.

SmartAsset.com does not provide legal, tax, accounting or financial advice (except for referring users to third-party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions and tools are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. Users should consult their accountant, tax advisor or legal professional to address their particular situation.

You will generally have to pay ordinary income taxes on your RMDs, unless you are withdrawing after-tax contributions. This can create a problem if you need less money than your minimum distribution was for, such as if you have other sources of income or multiple retirement accounts. In that case, you might prefer to leave the money in place for tax-deferred growth rather than pay income taxes on an unnecessary distribution.

One solution to this is converting your pre-tax portfolio to a Roth IRA, since Roth IRAs do not require RMDs for the original owner during their lifetime. Designated Roth accounts in 401(k) and 403(b) plans are also exempt from lifetime RMDs for the original owner.

How Do Roth Conversions Work?

A Roth conversion is when you move money from a pre-tax retirement account, such as a 401(k), to a post-tax Roth IRA.

Mechanically, the process is typically simple: You open a Roth IRA with a qualified brokerage. Then, you can instruct your plan manager to transfer the assets from your pre-tax portfolio to the Roth IRA. Alternatively you can withdraw the funds yourself and deposit them in the new account, but you’ll have to pay a mandatory 20% withholding tax out of your own funds. If you move the money on your own, you have 60 days to deposit it into the Roth portfolio, or you’ll face taxes and, potentially, early withdrawal penalties.

There is no limit on how much money you can convert each year, nor is there a limit on how often you can do so. But tax implications may make you think twice about how much you convert in any given year.

Tax Implications of Roth IRA Conversions

You generally must pay income taxes on the pre-tax amount that you convert. Any taxable amount that you convert to a Roth IRA will count toward your income for that year.

For example, if you convert $160,000 from your 401(k) to a Roth IRA, you will add that $160,000 to your taxable income for that year. At age 62, you can generally withdraw money from a retirement account without the 10% additional tax on early distributions, although using retirement assets to pay the conversion tax leaves less money invested.

Once you make a Roth conversion, though, these assets will continue to grow tax-free. For qualified retirement distributions, you will also pay no taxes when you withdraw the money later in life, and it will not count toward your overall taxable income.

Staggering Conversions to Reduce Taxes

A staggered Roth conversion is often effective at reducing the overall impact of conversion taxes. This approach allows you to manipulate your withdrawals to prevent yourself from climbing into a higher tax bracket, at least to some degree.

Take our example here: Setting aside other sources of income for the year, say that you want to convert $1.6 million from a 401(k) to a Roth IRA. You could either do so in a lump sum in one year, or in transfers of $160,000 each over the course of 10 years (not accounting for portfolio growth during that time or future tax changes). Assuming you’re a single filer in 2026, take the standard deduction and have no other income or deductions, here’s how the federal income taxes attributable to these simplified scenarios would compare using 2026 tax brackets:

Lump sum transfer:

Converted amount: $1.6 million
Taxable income after the $16,100 standard deduction: $1,583,900
Estimated federal income tax: About $542,000

Staggered transfer:

Annual converted amount: $160,000
Annual taxable income after the $16,100 standard deduction: $143,900
Estimated annual federal income tax: About $27,100
Estimated total over 10 years: About $271,000, assuming 2026 tax brackets and the standard deduction remained unchanged for the full period

In this simplified comparison, converting the money in stages keeps more of the converted amount out of the highest federal tax brackets. Actual results would depend on other income, deductions, future tax law and investment growth.

If you are making staggered conversions near your retirement age, just keep in mind that the five-year rule applies. Each Roth conversion has a separate five-year period for purposes of the 10% additional tax on early distributions of converted amounts, but that penalty generally does not apply once you are age 59 ½ or older. A separate five-year rule applies when determining whether Roth IRA earnings can be distributed tax-free.

How $160,000 Annual Conversions Could Affect Future RMDs

For someone who is 62 in 2026, RMDs generally begin at age 75 because a person that age would have been born in 1963 or 1964. That provides more than a decade before the first RMD, but converting $160,000 per year does not necessarily mean a $1.6 million 401(k) will be completely converted in 10 years.

Investment growth can increase the balance while conversions are taking place. For example, if the account starts at $1.6 million, earns a hypothetical 5% annually and $160,000 is converted at the end of each year, the balance would still be about $594,000 after 10 years. This calculation assumes no other contributions or withdrawals and does not guarantee future returns.

The remaining pre-tax balance would still be subject to RMDs once they begin. As a result, someone using annual conversions may need to review the conversion amount over time rather than assume that 10 conversions of $160,000 will eliminate a $1.6 million account. A financial advisor can help compare projected account growth, conversion taxes and future RMDs under different conversion schedules.

Bottom Line

By converting your 401(k) into a Roth IRA, you can avoid lifetime RMDs on the assets that are converted. However, this will trigger up-front conversion taxes on pre-tax amounts. Whether those taxes ultimately cost more or less than leaving the money in a traditional account depends on factors including your current and future tax rates, investment growth, retirement income and the size of future RMDs. Running projections for multiple conversion amounts can help clarify the tax implications before making a conversion.

Tips for Managing Your RMDs

A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whether you would like to maximize portfolio growth, have multiple streams of income or want to leave assets in place for your heirs, minimizing RMDs is often an important part of retirement planning. Here are six strategies that can help make that happen.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.