How to minimize taxes on a large pre-tax retirement account and RMDs
Large traditional pre-tax balances and required minimum distributions create a heavy tax burden and anxiety about future rates upon retirement. Mixing pre-tax and post-tax money in these accounts also complicates strategies like the backdoor Roth conversion.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
- 1Doing Roth conversions to pay taxes gradually
- 2Delaying Social Security until age 70 to open up tax space
- 3Building cash or CD ladders to live off during early retirement years
- 4Consulting a CPA or tax advisor for customized withdrawal strategies
- 5Thinking about combining traditional IRAs at Vanguard and using Fidelity to backdoor Roth IRA
- 6Rolling all traditional IRA funds into a current employer 401k plan if the plan allows it
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“I have over 800k sitting in a pre tax 401k. I am going to be retiring in 5-6 years at age 66 or 67. Is there some way to avoid or minimize a large tax burden-especially when RMD's kick in....”source ↗
“I realized I have created some weird mix of pre tax and post tax money iny IRA.”source ↗
“Something about since it's mixed pre tax and post tax I can't do the backdoor now because it's a weird tax situation or is that wrong.”source ↗
“Some things I read made it seem like I couldn't just put in $7k then backdoor Roth it because the account has pretax and post tax money”source ↗
Where this came up
People with this problem also raised
- 5What do I do with an inherited IRA?
- 3Can my retirement contributions exceed my earned income?
- 4How to avoid high fees on an inherited Edward Jones account
- 2How to hit max 401k contribution with whole percentage limits
- 5Should I invest extra savings in a brokerage account or a Roth IRA?
- 2Employer messed up my 401k start date and lost match