Suze Orman’s Pre-RMDs Playbook: Why She Tells Retirees to Roll the 401(k) to an IRA Immediately

On the June 13, 2024 episode of Women & Money, a listener named Peggy asked what plenty of pre-retirees feel but rarely say out loud. “I’ve been watching and listening for over 10 years. But I’m getting ready now for retirement in the next two years. What is the purpose of moving my 401k and 403 into an IRA? I feel so knowledgeable because of you, but I’m embarrassed to say I don’t quite know how to retire.” Suze Orman has answered this question consistently for years: once you stop working, roll the traditional 401(k) or 403(b) into a traditional IRA. Pre-tax goes to pre-tax. Build your retirement plan from there.

The stakes are real. Leave the money in the old employer plan and you inherit whatever fund menu, fee structure, and withdrawal rules that plan was designed around. You also forfeit access to two of the most powerful tax levers available to retirees between roughly 60 and 75: the Roth conversion runway and the qualified charitable distribution.

The verdict: she is right, and the reason is control

Orman’s advice holds up for the vast majority of retirees. The rollover itself triggers no taxes when you move from a traditional 401(k) to a traditional IRA. What it delivers is optionality, and optionality is the raw material of retirement tax planning. Four mechanics drive that value.

Investment menu

A typical 401(k) offers a dozen or so funds chosen by a committee working within plan constraints. An IRA at Fidelity, Schwab, or Vanguard opens access to essentially every mutual fund, ETF, Treasury, and CD on the market. For a retiree who needs a bond ladder, a money market sleeve to cover the next three years of spending, and a growth allocation for the long money, that is a considerably bigger toolbox.

Roth conversion runway

Once you stop working, taxable income typically drops before Social Security and required minimum distributions kick in. That gap, often the years between retirement and age 73, is when you can convert portions of the traditional IRA to a Roth at lower tax rates. Under SECURE 2.0, the RMD starting age rises to 75 in 2033 for those born after 1959, extending that conversion window further for younger pre-retirees. Doing partial Roth conversions out of a 401(k) is awkward or outright impossible at many employers. Out of an IRA, it is a phone call.

RMD aggregation

RMDs start at age 73 under current law. If you hold three traditional IRAs, the IRS lets you calculate the combined RMD and pull the full amount from any single account. With multiple 401(k)s, each plan’s RMD must come from that specific plan. Consolidating into one IRA collapses the paperwork and lets you pull from whichever holding makes the most financial sense each year.

Qualified charitable distribution

Starting at age 70½, you can send up to $111,000 per year directly from an IRA to a qualified charity. That figure is indexed for inflation and rose from $108,000 in 2025 to $111,000 in 2026. The distribution counts toward your RMD but never touches your adjusted gross income.

That AGI exclusion has grown more valuable under the One Big Beautiful Bill Act (P.L. 119-21), signed into law on July 4, 2025. For itemizers, the law caps the deductibility of charitable donations to the amount exceeding 0.5% of AGI, and limits the tax benefit of any itemized deduction to a maximum of 35 cents on the dollar, down from the prior 37 cents. Those two restrictions together compress the after-tax value of writing a check to charity. A QCD sidesteps both rules entirely, because it reduces income directly rather than generating a deduction. The law also created a new $1,000 above-the-line charitable deduction for non-itemizers (or $2,000 for joint filers), but the QCD’s $111,000 ceiling dwarfs that cap for retirees with larger charitable intentions. QCDs are an IRA-only feature. The IRS does not permit them from a 401(k).

What the math looks like for a real retiree

Consider someone retiring at 63 with $800,000 in a traditional 401(k) and $40,000 in expected Social Security starting at 67. From 63 to 72, taxable income is low. If that retiree rolls to an IRA and converts $50,000 a year to a Roth during those low-income years, a meaningful slice of the portfolio shifts to a tax-free bucket at the 12% or 22% federal bracket, rather than the higher rate they would face once RMDs and Social Security stack on top of each other at 73.

Leave the same $800,000 in the 401(k) with no conversion strategy and the RMD at 73 lands on top of full Social Security. That combination can push ordinary income into a higher bracket and trigger Medicare IRMAA surcharges. For single filers in 2026, those surcharges begin at $109,000 of modified adjusted gross income. Worth noting: IRMAA is calculated on a two-year lookback, so income from a high-conversion year at 63 will not affect Medicare premiums until 65. Large RMDs beginning at 73, however, show up in Medicare costs at 75 with no delay or appeal. The rollover unlocks the tools that prevent exactly that trap.

The one variable that can flip the decision

Plan quality. A small minority of 401(k) plans carry institutional share classes with expense ratios well below what a retail IRA investor can access, plus a stable value fund yielding meaningfully more than a money market. If your plan is one of them and you have no need for Roth conversions or QCDs, staying put can be defensible. Two other carve-outs deserve attention: the rule of 55 (penalty-free withdrawals from the current employer’s 401(k) if you separate from service at 55 or later) and net unrealized appreciation on highly appreciated company stock. Both strategies disappear the moment you roll.

What to actually do before the rollover paperwork

1. Pull your 401(k) plan’s fee disclosure and compare the expense ratios to a Vanguard or Fidelity equivalent. If your plan is more expensive, the rollover case strengthens immediately.
2. Check for company stock in the plan. If you hold a large embedded gain, talk to a CPA about net unrealized appreciation before initiating any transfer.
3. Map out a Roth conversion schedule from your retirement date to your RMD start age. Decide how much to convert each year to fill the 12% or 22% bracket without spilling into the next one, and keep an eye on the IRMAA lookback window.
4. Choose one IRA custodian and consolidate. Multiple IRAs are legally fine, but a single account makes RMD aggregation and QCDs cleaner to manage.
5. Set a calendar reminder for the year you turn 70½ to begin using QCDs if you give to charity. Under the 2026 rules, the QCD’s full AGI exclusion is more valuable than an itemized cash donation for most retirees in higher tax brackets.

Orman’s instruction to Peggy is ultimately about moving the money to the account type that puts the most tax levers in a retiree’s hands between 60 and 75. Use them or skip them, but at least own them.

Editor’s note: The One Big Beautiful Bill Act signing date has been corrected to July 4, 2025 (from an imprecise “2026” reference), and additional context on the law’s 35-cents-on-the-dollar cap for itemized deductions and its new $1,000 non-itemizer charitable deduction has been added to the QCD section. The IRMAA two-year lookback mechanic is now noted in the math example to clarify when surcharges apply relative to conversion and RMD activity.

Contact [email protected] for any questions or corrections.