Millions of Americans have a ticking time bomb in their tax-deferred accounts — 3 easy ways to start defusing it now

As of July, the average 401(k) balance for someone in their 50s was $642,696, according to Empower . And the number of 401(k) millionaires also reached a record-high last year, coming in at 645,000.

Meanwhile, Empower found that Americans in their 50s now hold an average $483,451 in their Individual Retirement Accounts (IRAs).

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If you're one of them, congratulations. But before you start making plans for what to do with that sizable balance, you'll want to pump the brakes. That's because since these are tax-deferred accounts, the IRS is eventually going to come knocking for its share of your stash.

Waiting until you're forced to take your required minimum distributions (RMDs) can push you into a higher tax bracket, impacting the taxes on your Social Security benefits and even increase your Medicare premiums. If you're caught unprepared, a major tax bill could blow up your entire retirement plan.

A little advanced planning can save you big bucks in the long run. Here are three easy strategies to help you defuse this ticking time bomb before it goes off.

One way to start defusing the problem is by taking advantage of capital gains' preferential tax treatment. In 2026, capital gains are taxed at 0% up to $49,450 for an individual and $98,900 for a married couple filing together. But if your income for the year exceeds those thresholds (up to $545,500 and $613,700, respectively), you'll face a 15% capital gains tax.

By strategically tapping your tax-deferred accounts and selling appreciated investments within these thresholds, you can "harvest" gains at low or even zero tax cost. Spreading withdrawals and sales out gradually (over 10 or 15 years, for instance) can shrink your tax-deferred balances and reduce future RMDs, preventing a larger tax hit later on.

Another smart way to manage future tax exposure is through Roth conversions. Under specific conditions, Roth IRAs do not have required minimum distributions (RMDs) for the original owner — and withdrawals in retirement are tax-free. This is why the Roth conversion strategy is so popular with affluent retirees looking to minimize their tax bill.