Up until 2019, IRA holders did not have to take money out of their IRAs – and pay taxes on those distributions – until they turned a certain age (which is currently 72 for those born after 1949) regardless of whether their IRAs were their own or inherited. Because of this, someone could name a beneficiary who was much younger – a grandchild, for example – and keep wealth untaxed for generations. This estate-planning technique was known as the “stretch IRA.”
If you’ve become a 401(k) millionaire or amassed large sums in other tax-deferred retirement accounts, you can potentially shave your lifetime taxes by hundreds of thousands of dollars by converting part of it to a Roth IRA before you start collecting Social Security. But figuring out how much to convert—and when—is a tricky exercise.
Many people are retiring early. The St. Louis Federal Reserve reported that upwards of 3 million Americans retired early due to the COVID-19 pandemic.