Can I Put My RMD Into A Roth IRA?

with No Comments

Can I Put My RMD Into A Roth IRA?

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:

  1. 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.
  2. 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.
  3. If you are still working and can participate in a Roth 401(k), you will be able to fund your Roth 401(k) 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 401(k), 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.

Photo used here under Flickr Creative Commons.

Follow David John Marotta:

President, CFP®, AIF®, AAMS®

David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.