My BIL has a Traditional 401(k) & does not have any Roth accounts. He is 61 and planning to retire next year. He will need to take “some” distributions in the next couple of years but “some other” funds can stay within the plan for a number of years.

He will have two lower-income years in the first years of his retirement and is considering whether he should convert his 401(k) to a Roth – whether a Roth 401(k) or a Roth IRA.

Is my understanding correct that he will not be subject to 10% penalties because he’s > 59 1/2, but that any post-conversion earnings withdrawn in the first 5 post-conversion years would be subject to tax because his conversion will establish his first-ever Roth account? Also, is my understanding correct that those taxable earnings will be some % of every distribution from a Roth 401(k), but would only be part of his Roth IRA distributions after he’d withdrawn the entire conversion amount, and the withdrawal of the converted amount from his Roth IRA would be tax- & penalty-free even in the first 5 years after the conversion? It would then follow that if he expects to be taking any withdrawals in the first 5 post-conversion years, then he should be converting to a Roth IRA and not to a Roth 401(k), right? And while he’s taking time to make his decision now, he should go ahead and open & fund a $20 backdoor Roth IRA today, just to start the clock ticking on 5 years, going back to 1/01/21 (consistent with your “time-machine” newsletter issue)?

Thank you for your advice,

MK