Converting a trad IRA to a Roth in yr turn 70 1/2

Submitted by Alanna Crawford on Fri, 2008-06-13 18:59

If an individual would like to convert their traditional IRA to a Roth in the year in which they turn 70 1/2, but before their Required Beginning Date, do they have to take an RMD before converting?
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The actual situation is that we have a client turning 70 1/2 in October of 2010. Because the client is currently over the $100,000 MAGI limit, they cannont convert, but would like to do so when the limit is lifted in 2010. They want to know if they must take an RMD in 2010 because their RBD isn’t until April 1, 2011.

I am inclined to say they must take the RMD because it is for the 2010 year, it just doesn’t have to be distributed until 4/1/11.

Any thoughts?



Submitted by Alan Spross on Fri, 2008-06-13 23:50

Conversion in the 70.5 year must be done after the RMD distribution, since the first distribution in that year is deemed to be applied to the RMD. A conversion is a distribution and rollover. This forces either the conversion date to be delayed or the RMD to be moved up. Since the conversion is usually a larger amount, it makes some sense to convert when the client wants, just move up the RMD date accordingly. Obviously, this eliminates RMD deferral until the RBD year for those that would otherwise defer it, but wish to convert.

Submitted by Mark Hilgenberg on Wed, 2013-12-04 18:26

Alan, I was told that as long as someone converts before their RBD, they do not have to take their RMD prior to conversion. Do you have any irs sources on this?

Submitted by Alan - IRA critic on Wed, 2013-12-04 22:52

  • That is not correct as indicated in the following copied from IRS Reg. 1.408A-4, Q 6 in the next bullet point. Note that the key is if an RMD is required FOR a year, the rule applies. It is immaterial that the RMD required FOR the year an IRA owner reaches 70.5 can be deferred until the followin 4/1. An RMD is still required FOR the 70.5 year and therefore a conversion done with the first distribution of that year results in the rollover of the RMD to the Roth and is treated as an excess Roth IRA contribution that needs to be corrected.
  • “Q–6. Can an individual who has attained at least age 70 1/2 by the end of a calendar year convert an amount distributed from a traditional IRA during that year to a Roth IRA before receiving his or her required minimum distribution with respect to the traditional IRA for the year of the conversion?A–6. (a) No. In order to be eligible for a conversion, an amount first must be eligible to be rolled over. Section 408(d)(3) prohibits the rollover of a required minimum distribution. If a minimum distribution is required for a year with respect to an IRA, the first dollars distributed during that year are treated as consisting of the required minimum distribution until an amount equal to the required minimum distribution for that year has been distributed.(b) As provided in A–1(c) of this section, any amount converted is treated as a distribution from a traditional IRA and a rollover contribution to a Roth IRA and not as a trustee-to-trustee transfer for purposes of section 408 and section 408A. Thus, in a year for which a minimum distribution is required (including the calendar year in which the individual attains age 70 1/2, an individual may not convert the assets of an IRA (or any portion of those assets) to a Roth IRA to the extent that the required minimum distribution for the traditional IRA for the year has not been distributed.(c) If a required minimum distribution is contributed to a Roth IRA, it is treated as having been distributed, subject to the normal rules under section 408(d)(1) and (2), and then contributed as a regular contribution to a Roth IRA. The amount of the required minimum distribution is not a conversion contribution”  

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