Should I Convert 20% of My 401(k) into a Roth IRA Each Year to Avoid Taxes and RMDs? Eric Reed June 3, 2026 8 min read SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. With retirement planning and taxes, there are often two ways to look at a question: First, can you do something, and then, should you do it?
For example, let's say we have a household planning for retirement. Would it be wise for them to convert their 401(k) into a Roth IRA 20% at a time in order to avoid taxes and RMDs? Technically, this is certainly allowed.
Whether this is wise, that's a different matter. In general, this plan will work better the younger you are and the less you currently make. On the other hand, the closer you are to retirement or the higher your current income, the more likely it is that this won't be worth the conversion taxes.
As Aaron Cirksena, founder and CEO of MDRN Capital, told SmartAsset, "You have unique challenges that are based on your own situation that need to be considered." This is a question for your own finances, not a generic or one-size-fits-all approach. To find professional guidance tailored to your situation, you can get matched with up to three financial fiduciary advisors for free. Converting Your Roth IRA To Avoid RMDs Pre-tax retirement accounts, like a 401(k), have a rule called the required minimum distribution (RMD).
This is the minimum amount you must withdraw from your portfolio each year starting at age 73. As with all pre-tax distributions this adds to your taxable income for the year, which is the entire point. The IRS wants to make sure you pay for your tax-deferred accounts eventually.
Depending on your circumstances, this can disrupt your financial planning. Some households want to live on other income or assets, letting tax-deferred accounts continue to grow. Others simply don't need this money and want to leave it to their heirs.
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