I am 73 years old and my traditional IRA is subject to required minimum distributions (RMDs). I don’t need the money. Is it possible to put the RMD into a Roth IRA as a Roth IRA conversion?
You cannot put your RMD directly into a Roth account. Annual required minimum distributions must be satisfied before any additional amounts are converted to a Roth IRA.
That doesn’t mean you can’t use your required distribution to help fund your Roth accounts. Here are several methods you should consider:
- After satisfying your annual RMDs you may still benefit from an additional Roth conversion. Sometimes recognizing a little additional income in a Roth conversion this year can help eliminate a great deal of additional income in future required minimum distributions. Knowing how much to convert depends on multi-year future projections of account growth and tax returns. The money you are required to withdraw anyway can help provide cash for paying the taxes on the additional Roth conversion.
- If you are still working, you can continue to contribute to a Roth IRA each year. But the year after you turn 70 1/2, you are not allowed to contribute to a traditional IRA. Therefore if your income does not allow you to contribute directly to a Roth IRA, you will not be able to do a backdoor Roth IRA. To the extent that you can contribute to a Roth IRA you can put some of your traditional RMD withdrawals into a Roth IRA.
- If you are still working and can participate in a Roth 401k, you will be able to fund your Roth 401k for $24,000 in 2015. You can contribute $18,000 plus an additional $6,000 catch-up provision for being over age 50. Since you can contribute $24,000 to your Roth 401k, you can supplement the drop in your take-home pay with the money you are required to take out of your traditional IRA as a required minimum distribution.
Although your traditional IRA RMDs cannot be put directly into a Roth IRA, they may still help you get more money into your Roth accounts.
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