Retirement Tax Bomb: Couples Face $1.3M Tax on $7M RMDs

AI Summary

A couple in their 40s, with a $1.5 million traditional 401(k), faces significant tax implications due to Required Minimum Distributions (RMDs). Their planner projects that by age 75, their balance could grow to between $6 million and $8 million, leading to a first-year RMD of approximately $285,000. This would escalate their tax rate from 12% to 32%. By strategically executing Roth conversions before reaching age 75, they could potentially save $1.3 million in taxes and increase their assets by $3.5 million over their lifetime.