Having retirement dollars mainly in traditional savings plans can handcuff older workers.

A bumper 401(k) balance isn't always a blessing. For many older workers, large traditional 401(k) holdings create tax complications that can significantly impact retirement planning strategies.

The issue stems from required minimum distributions (RMDs) that begin at age 73. These mandatory withdrawals from traditional 401(k) accounts are taxed as ordinary income, potentially pushing retirees into higher tax brackets than anticipated.

Financial advisors warn that workers approaching retirement should consider diversifying their tax approaches rather than relying solely on traditional 401(k) contributions.

Roth conversions and taxable investment accounts can provide more flexibility in managing tax liabilities during retirement years.

The Wall Street Journal Markets reports that this growing concern affects millions of older workers who have accumulated substantial traditional retirement savings over decades of employment.