401(k) Rollover to IRA vs In-Plan Annuity on $850K: How SECURE 2.0's RMD Age 73 Rule Changes the Decision at 63

You have $850,000 sitting in your 401(k). You're 63, planning to retire in two years, and someone just told you to roll everything into an IRA. Before you sign those rollover forms, consider this: SECURE 2.0 changed two things that could make staying in your 401(k) — or at least keeping part of it there — worth a hard second look.

This isn't just about investment options. It's about tax sequencing, RMD timing, a new in-plan guaranteed income option your plan may already offer, and a Social Security system that Congress is actively debating right now. The order and structure of your decisions in the next 10 years matters more than most people realize.

What SECURE 2.0 Changed That Directly Affects This Decision

SECURE 2.0, signed into law in December 2022, reshaped the landscape for near-retirees in four specific ways that bear directly on whether rolling your 401(k) to an IRA still makes sense at 63:

RMD age moved to 73. The original SECURE Act pushed required minimum distributions from 70½ to 72. SECURE 2.0 moved it again, to 73 effective 2023. If you're 63 today, that's a 10-year window before RMDs begin — a window that can be used strategically for Roth conversions instead of being wasted.

Roth 401(k) accounts no longer face RMDs. Starting in 2024, Roth 401(k) balances are exempt from required minimum distributions during the account owner's lifetime. Previously, one major reason to roll a Roth 401(k) into a Roth IRA was to avoid RMDs. That reason has largely disappeared for those who want to stay in the plan.

Enhanced catch-up contributions for ages 60–63. Under SECURE 2.0, workers in this specific age bracket can contribute a special catch-up of $11,250 to their 401(k) in 2025 (versus $7,500 for standard catch-up eligible workers 50+). If you're still working and haven't crossed 64, this is a one-time window that disappears when you separate from service — and rolling to an IRA doesn't replicate it.

In-plan annuities are expanding. SECURE 2.0 provisions actively encouraged 401(k) plans to integrate annuity options, including Qualifying Longevity Annuity Contracts (QLACs). According to recent CNBC reporting, in-plan annuity offerings are growing — though adoption remains limited because most participants don't know the option exists. Rolling out of the plan means losing access to in-plan pricing without going through the retail annuity market, where costs are typically higher.

The IRA Rollover: What You're Actually Getting (And Giving Up)

IRAs now hold more retirement assets than 401(k) plans combined — and that wealth is overwhelmingly rollover money, not new contributions. As CNBC recently reported, this creates a real risk: once assets move outside a 401(k), they leave ERISA's fiduciary protections behind. Some rollover-focused advisors are compensated through product commissions rather than purely in your interest.

That said, IRAs offer genuine advantages:

• Unlimited investment options versus a plan's limited menu
• Full Roth conversion flexibility on your own timeline
• Consolidation of multiple old employer accounts into one place
• Potentially lower-cost fund access if your 401(k) has expensive options

The question isn't whether IRAs are ever the right choice. It's whether rolling over right now, at 63, with 10 years before RMDs begin is the optimal sequence — or whether you're giving up tools you haven't fully used yet.

The RMD Math: Why a $57,400 Forced Withdrawal at 73 Isn't Inevitable

Let's run the numbers on $850,000 in a traditional 401(k) today.

Assume 6% average annual growth over the next 10 years:

850,000 × 1.06 to the 10th power ≈ $1,522,000

Under the IRS Uniform Lifetime Table (IRS Publication 590-B), the life expectancy divisor at age 73 is 26.5. Your first RMD would be approximately:

$1,522,000 ÷ 26.5 ≈ $57,400 in year one

Add Social Security — say $27,600/year if you claim at 67 — and your gross income at 73 is roughly $85,000. For a single filer in 2026, that puts you squarely in the 22% bracket (which runs from approximately $47,150 to $100,525). You'd also trigger 85% of your Social Security benefit becoming taxable income.

The alternative: use ages 63–72 to do systematic Roth conversions, filling the 22% bracket each year. Converting $55,000/year for 10 years at an approximate 20% effective federal rate costs around $11,000/year in taxes — but it prevents a compounding RMD burden that could reach $70,000+ by ages 75–76 as the portfolio continues growing. This is exactly why retirees with $1M+ traditional IRA balances convert in their early 60s rather than waiting for RMDs to force the issue.

This is the kind of 10-year projection Lontevis models for your specific situation — mapping different conversion amounts against your Social Security timeline, IRMAA thresholds, and projected RMDs.

The QLAC Option: Carving Out $200K to Cut Your RMD Bill

If your 401(k) plan offers an in-plan QLAC, here's the math worth knowing.

A Qualifying Longevity Annuity Contract lets you allocate up to $200,000 toward a deferred income annuity that begins paying at a future age — typically 80 or 85. Critically, under IRS rules updated by SECURE 2.0, that $200,000 is excluded from your RMD calculation until payouts begin.

What that means in practice:

• $200K in a QLAC for income starting at 80 might pay $28,000–$36,000/year (rates vary by insurer and your age at purchase)
• At 73, your RMD base drops by $200K: saving $200,000 ÷ 26.5 ≈ $7,500 in forced withdrawals in year one alone
• Over the 7-year window from ages 73 to 79, the avoided RMD from that QLAC allocation totals approximately $52,500 — giving you more flexibility to manage other income sources and tax brackets

Whether this works depends on your health and longevity expectations. The SSA's 2024 Period Life Table shows a 65-year-old male has roughly a 67% probability of reaching age 80; for females, it's closer to 76%. If you're in excellent health and come from a family with longevity history, the QLAC math gets considerably more favorable.

Social Security Reform Risk: The Variable Nobody Is Pricing In

Congress is actively debating Social Security's funding structure. As CNBC recently reported, some Washington lawmakers are pushing to lift or eliminate the payroll tax wage cap — currently $176,100 in 2026 — to generate more revenue for the program. The Social Security trust fund is projected to face depletion around 2033–2035, at which point benefits could be automatically reduced by approximately 17–23% under current law without legislative action.

For your withdrawal plan, this matters directly: your safe withdrawal rate from your portfolio depends on how reliable your Social Security income floor is.

If you're counting on $27,600/year from Social Security at 67, and benefits get cut to $22,600 due to trust fund depletion, your portfolio has to cover an additional $5,000/year — every year, for potentially 25+ years. That's $125,000 in unplanned additional portfolio draws before accounting for inflation.

This is one reason the 62 vs. 67 vs. 70 Social Security claiming decision is so consequential right now: a higher base benefit at 70 means a higher baseline even if a percentage cut occurs. An 80% benefit on $3,500/month is meaningfully better than 80% on $2,300/month.

The Decision Matrix: Stay vs. Roll

Scenario	Stay in 401(k)	Roll to IRA
Plan offers QLAC or in-plan annuity	✅ Use it	❌ Lose in-plan access
Want full Roth conversion flexibility	⚠️ Limited by plan rules	✅ Full control
Still working, ages 60–63	✅ Max enhanced catch-up ($11,250)	❌ Not replicable in IRA
Roth 401(k) balance	✅ No RMDs after 2024	✅ Roth IRA also has no RMDs
Creditor protection priority	✅ ERISA federal protection	⚠️ State-dependent only
Poor investment menu with high fees	❌ Stuck with limited options	✅ Full market access
Beneficiary planning (non-spouse heirs)	⚠️ 10-year rule applies	⚠️ 10-year rule still applies (SECURE 2.0)
Fiduciary protection concern	✅ Plan fiduciary required	⚠️ Varies by advisor

The answer is almost never "roll everything" or "keep everything." It's a sequencing and allocation decision — and it's best made with actual numbers, not generalizations.

A Worked Example: The $850K Split Strategy

You're 63, with $850K in a traditional 401(k). Your plan just added a QLAC option and offers a solid low-cost index fund lineup. You plan to retire at 65 and claim Social Security at 67 for roughly $2,300/month ($27,600/year).

One approach worth modeling:

Ages 63–64 (still working): Maximize the enhanced catch-up contribution — $11,250/year — directed into a Roth 401(k) sub-account. That's approximately $22,500 in additional Roth money before you retire, growing permanently tax-free.

At age 65: Allocate $200,000 to the in-plan QLAC, locking in deferred income starting at 80. This removes $200K from your future RMD base and creates a guaranteed income layer for late-retirement longevity risk.

Roll the remaining ~$650K to a traditional IRA at retirement. Use ages 65–72 to convert $50,000–$55,000/year to Roth, staying within the 22% bracket and below the IRMAA surcharge threshold (approximately $106,000 MAGI for single filers in 2026).

Claim Social Security at 67, establishing a $27,600/year income floor that reduces portfolio withdrawal pressure throughout the Roth conversion window.

The tax math:

• Converting $52,000/year for 8 years at a ~20% effective rate costs roughly $83,000 total in conversion taxes
• That eliminates approximately $57,400/year in forced RMDs at 73 — cumulative RMD income of nearly $460,000 over 8 years that would otherwise be taxed at higher rates as your portfolio continues growing
• Estimated net lifetime tax savings from this combined approach: $45,000–$85,000, depending on bracket drift, COLA increases, and state tax treatment

Your actual numbers will differ based on your filing status, state of residence, Social Security benefit, other income sources, and portfolio allocation. That's exactly the point — the strategy is directionally clear, but the optimal conversion amount and QLAC allocation depend on inputs only you can provide.

You can model this specifically for your situation at Lontevis, including the full RMD projection, Roth conversion ladder, and Social Security timing comparison in one place.

Before You Sign Those Rollover Forms

The 401(k)-to-IRA rollover is often framed as "more options equals better." That's sometimes true. But SECURE 2.0 gave your 401(k) meaningful new tools — in-plan annuities, Roth RMD elimination, and enhanced catch-up contributions — that frequently go unused because participants don't know they exist. Rolling before you've used them may mean paying for the exit you didn't need yet.

Before deciding, do three things:

1. Call your plan administrator and ask specifically whether your plan offers QLACs, in-plan Roth conversions, or annuity income options. If it does, get the fee schedule before making any rollover decision.

2. Project your RMD at 73 using your current balance compounded forward at a conservative growth rate. The number is almost always larger than people expect — and the window to shrink it through Roth conversions before RMDs hit is narrower than it feels.

3. Check whether you're still 60–63, and if so, maximize the enhanced catch-up contribution before you separate from service. That window closes the moment you leave.

The rollover paperwork takes 10 minutes. The consequences play out over 30 years of withdrawals, RMDs, and taxes. Run your specific numbers first — then decide which direction the math actually points.

Lontevis is built for exactly this decision: modeling your withdrawal sequence, Roth conversion ladder, QLAC allocation, and Social Security timing in one place — so you're not optimizing one variable while accidentally making the others worse.

Sources

• Annuity options are growing in 401(k)s, but adoption remains limited — CNBC Personal Finance
• IRAs hold trillions more than 401(k) plans — yet people hardly save in them — CNBC Personal Finance
• Small-Business Tax Calculator 2026 — NerdWallet Retirement
• Before there were Trump Accounts, SEED OK gave some newborns $1,000 — how researchers say the grants affected kids — CNBC Personal Finance
• As Social Security faces trust fund depletion, some Washington lawmakers call for taxing high earners — CNBC Personal Finance