"From age 60 to 75, every dollar moved from a traditional IRA to a Roth is voluntary. After 75, the IRS sets the withdrawal amount through the Uniform Lifetime Table."
"Compound $7.5 million at a 7% net return for 15 years, and the account grows to roughly $20 million. The first-year RMD lands in the $800,000 to $900,000 range, all of it ordinary income."
"Fill the 24% federal bracket. Roughly $364,000 per year, with a combined federal-plus-California rate near 33%. The cheapest tax rate per dollar converted, but the smallest dent in the future RMD base."
"Fill the 35% bracket. Roughly $763,000 per year at about 44% combined. Aggressive, accelerates the tax bill, and only barely undercuts the projected RMD rate."
A 60-year-old with a $7.5 million traditional IRA faces a dilemma on how aggressively to convert to a Roth IRA. Converting too little may lead to high taxes from required minimum distributions starting at age 75, while converting too much incurs immediate tax liabilities. The 15-year window before age 75 allows for voluntary conversions, with potential growth to $20 million. Three conversion strategies are analyzed: filling the 24% bracket, the 32% bracket, and the 35% bracket, each with different tax implications and impacts on future RMDs.
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