Navigating RMDs at 60: Is a $100K Annual Roth Conversion the Right Move for a $1.1M IRA?

For many Americans, the golden years of retirement come with an unavoidable companion from the IRS: Required Minimum Distributions (RMDs). These mandatory withdrawals from pre-tax retirement accounts like traditional IRAs can create unexpected tax burdens and complicate financial planning. One strategy to sidestep RMDs entirely is converting funds to a Roth IRA, but this move requires paying taxes today to secure tax-free growth tomorrow. Is it worth it?

Consider a hypothetical investor at age 60 with $1.1 million in a traditional IRA. If the portfolio grows at a conservative 8% annually with no further contributions, it could balloon to nearly $3 million by the time RMDs kick in at age 73. That first-year RMD could be over $112,000, triggering a tax bill of at least $17,000—and that's just the beginning of a yearly obligation.

The Roth Conversion Calculus

A Roth conversion involves moving funds from a pre-tax IRA to a post-tax Roth IRA. The advantages are twofold: withdrawals in retirement are tax-free, and Roth accounts are exempt from RMDs, allowing money to grow undisturbed. The catch? You must pay income tax on the converted amount in the year of the conversion.

Converting the entire $1.1 million at once could catapult a single filer into the top 37% tax bracket, resulting in a staggering $400,000+ tax hit. A more measured approach—converting $100,000 annually over 11 years—might keep the investor in the 22% or 24% bracket, reducing the total tax liability to roughly $220,000 and smoothing out the fiscal impact.

However, this strategy isn't without its opportunity costs. Every dollar paid in taxes is a dollar not invested. The key question becomes whether the long-term tax savings from avoiding RMDs and securing tax-free growth will outweigh the compounded returns lost to upfront tax payments.

Expert Insight: Timing is Everything

The conventional wisdom hinges on comparing current and future tax rates. "If you expect to be in a higher tax bracket in retirement due to other income sources like Social Security or pensions, paying taxes now at a lower rate can be a brilliant move," explains Michael Thorne, CFP®, a financial planner with Harbor Wealth Group. "But if your income will drop significantly in retirement, you might be better off deferring taxes and managing RMDs strategically."

Thorne also highlights the five-year rule for Roth accounts and the importance of having liquid funds outside the IRA to cover conversion taxes without dipping into retirement savings itself.

Reader Reactions: A Heated Debate

We presented this scenario to several readers nearing retirement:

• David R., 58, small business owner: "This analysis is spot-on. I'm doing staged conversions now while my business income is lower. It's about control—I hate the idea of the IRS forcing me to withdraw money on their schedule."
• Susan Lee, 62, former teacher: "It's a gamble on future tax policy. What if rates go down? You've paid a huge sum upfront for nothing. I'd rather keep my money invested and deal with RMDs later. The government will always find a way to get its share."
• Robert Chen, 59, tech engineer: "The math is compelling for high-growth portfolios. Eliminating RMDs means my heirs inherit a tax-free account. It's not just about my retirement; it's a legacy planning tool."
• Patricia Miller, 61, retiree: "This is classic overcomplication by the financial industry! All these fees and strategies... For most people, just max out your 401(k), live below your means, and you'll be fine. The system is designed to confuse us into paying advisors."

The Bottom Line

There is no universal answer. The decision requires a personalized analysis of current income, projected retirement cash flows, state tax considerations, and even estate planning goals. While a staged Roth conversion can be a powerful tool to manage future tax liability and increase financial flexibility, it demands careful planning and often, professional guidance. For our 60-year-old with $1.1 million, converting $100,000 annually might be a prudent middle path—if their current tax bracket is lower than what they anticipate in retirement.

As with all major financial decisions, consult with a fiduciary financial advisor to model scenarios specific to your situation before proceeding with a conversion strategy.