I’m 58 With $680k in My 401(k). Does It Make Sense to Pivot to Roth Contributions?

Roth IRAs can be appealing because they allow tax-free withdrawals and have no required minimum distributions (RMDs). For younger savers, paying taxes now for tax-free growth later can be a smart move. But, if you are near retirement, this strategy can be more complicated. Balances are typically larger, the time to grow tax-free is shorter and current tax rates may be higher. Before you pivot to Roth contributions, let’s answer this question: Does it make sense for you to pay taxes upfront or keep your retirement money in a pre-tax account? Here’s an example of a 58-year-old with $680,000 in a 401(k) to help you decide.

A financial advisor can help you weigh the tax tradeoffs, project future income needs and decide whether adding Roth contributions makes sense for your retirement plan.

A Roth IRA is a retirement account funded with after-tax dollars. You don’t get a tax deduction when you contribute, but the big benefit is that qualified withdrawals in retirement are tax-free. Those withdrawals also don’t add to your taxable income, which can help keep future costs like Medicare premiums or Social Security taxes lower.

There are two main ways to put money in a Roth IRA. One is a conversion, where you move funds from a pre-tax account such as a 401(k) or traditional IRA into a Roth. The converted amount is treated as taxable income in that year, but after that it grows and can be withdrawn tax-free. There’s no annual limit on conversions.

The other way is through contributions from earned income, like wages or self-employment pay. You can’t use investment income or gifts for this. In 2025, the contribution limit is $7,000 per year, or $8,000 if you’re age 50 or older. Income limits apply to contributions, but not to conversions.

Pivoting to Roth contributions early in your career can make sense if your tax rate is relatively low and you have decades for growth. If this is your case, then paying taxes upfront on a small balance may cost little now but could save you much more later as your money grows tax-free and you do not have to take RMDs.

To show how this could work, let’s take the example of a 28-year-old with $15,000 in a 401(k). If they move it to a Roth IRA, their taxable income would rise from $50,000 to $65,000. Using 2025 tax brackets for individuals, the tax on $50,000 of income comes to about $5,914 (10% on the first $11,925, 12% on the next $36,550 and 22% on the last $1,525), while the tax on $65,000 is about $9,214 (10% of $11,925 + 12% of $36,550 + 22% of $16,525).

That’s an increase of $3,300 in federal taxes for the yearly conversion.

Now, let’s use the future value formula to calculate how much $15,000 could grow over 40 years with two fixed annual return rates:

• FV (Future Value): The amount the investment will be worth at the end of the period.
• PV (Present Value): The starting amount of the investment. In this case, $15,000.
• r (Rate of return): The annual growth rate expressed as a decimal (7% = 0.07, 10% = 0.10).
• n (Number of periods): The number of years the money is invested. Here, 40 years.

• At 7%: FV = $15,000 × (1 + 0.07)^40 ≈ $223,600.
• At 10%: FV = $15,000 × (1 + 0.10)^40 ≈ $652,700.

In this general example, $15,000 could potentially grow to $224,000 (at 7%) or $653,000 (at 10%) in 40 years. Therefore, paying $3,300 upfront could help you avoid income taxes on hundreds of thousands of dollars in retirement.

Shifting funds during your working years or early retirement can help control taxes later. Many retirees choose phased conversions rather than moving everything at once. By spreading smaller amounts over several years, you could potentially stay within lower tax brackets like 22% or 24% and avoid a larger one-time tax hit. This will require you to plan around other income sources like pensions, investment withdrawals and Social Security.

Roth IRAs also appeal to people who want more flexibility in estate planning. They don’t require minimum distributions for the original owner, allowing money to grow longer if not needed right away. Additionally, beneficiaries can withdraw inherited Roth funds tax-free within 10 years, making them a useful tool for passing wealth to the next generation while keeping future tax burdens lower.

For someone age 58 with $680,000 in a 401(k), the tradeoffs of Roth contributions are different. The main benefit is tax-free income in retirement. Withdrawals from a Roth IRA are untaxed, which makes planning more predictable and may reduce lifetime tax costs.

For example, if you pay a 10% tax rate and earn $110, you will pay $11 in taxes and put $99 into a Roth IRA. If that $99 grows to $1,000, you can withdraw it tax-free. By paying $11 now, you avoid paying about $100 later (10% of $1,000 = $100).

The drawback, however, is the opportunity cost. Paying taxes up front reduces the amount you can invest.

When you contribute money to a Roth IRA, you pay taxes first and then invest what’s left. That means part of your income never makes it into the account. For example, if you earn $1,000 and pay a 10% tax rate, you’ll put $900 into your Roth IRA. If that grows at an 11% average annual return for 20 years, it could reach about $7,256. (This comes from the future value formula: $900 × (1 + 0.11)^20, where $900 is the starting amount, 0.11 is the 11% growth rate and “^20” means compounding over 20 years.)

With a traditional IRA, you wouldn’t pay taxes upfront. The full $1,000 gets invested. At the same 11% return for 20 years, it could grow to about $8,062, calculated as $1,000 × (1 + 0.11)^20. The difference of about $806 shows the cost of paying taxes before you contribute instead of later.

With a traditional IRA, you wouldn’t pay taxes upfront. The full $1,000 gets invested. At the same 11% return for 20 years, it could grow to about $8,062. The difference of $806 shows the opportunity cost of losing investment capital when you pay taxes before contributing.

At age 58 with $680,000 in a 401(k), the decision to add Roth contributions is less about building long-term growth and more about balancing taxes, income needs and legacy planning. The tradeoff is paying taxes now in exchange for tax-free withdrawals later.

Roth IRAs can be valuable for estate planning since they don’t require minimum distributions during your lifetime. That means funds can stay invested longer if you don’t need them right away, and heirs can withdraw the money tax-free within 10 years. For someone who wants to pass on assets while minimizing future tax burdens, that flexibility can be attractive.

For retirement income, the numbers tell the story. If your $680,000 401(k) compounds at 8% annually, it could grow to about $1.36 million by age 67 (FV = $680,000 × 1.08^9). Drawing 6% per year would provide roughly $81,000 in taxable income. If you also contribute $7,000 annually to a Roth IRA for the next nine years, that side account could reach about $87,600 by age 67. Left untouched until age 87, it could grow to around $408,000.

Income eligibility also matters. In 2025, Roth IRA contributions phase out for single filers between $150,000 and $165,000 of income, and for joint filers between $236,000 and $246,000. Conversions bypass these limits but come with an immediate tax bill, which can be steep this late in life.

Late Roth contributions likely won’t replace the central role of your 401(k), but they can create a tax-free cushion. Whether it’s worthwhile depends on your tax bracket, other income sources and whether leaving assets to heirs is a key goal.

Pivoting to a Roth IRA later in life can make sense if you have a specific goal. Households often focus on maximizing their existing retirement accounts, but if your basic retirement needs are already secure, Roth contributions can add value. They can be used to pass wealth to heirs in a tax-free form or to create a reserve that helps protect against future tax increases or inflation risk.

• A financial advisor can help you determine when is the best time retire and manage other factors to maximize your benefits. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If you want to diversify your retirement portfolio, here’s a roundup of 13 investments to consider.

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