Traditional IRA RMD into ROTH?
Can you take an RMD from a traditional IRA and put it into a ROTH. The IRS website says no but why not? If I take money out of an IRA and pay taxes on it why can’t I put it into a ROTH?
Can you take an RMD from a traditional IRA and put it into a ROTH. The IRS website says no but why not? If I take money out of an IRA and pay taxes on it why can’t I put it into a ROTH?
Permalink Submitted by Alan Spross on Tue, 2012-10-16 16:35
If you were working, you could use RMD money to make a regular Roth IRA contribution (if eligible).
However, what you are asking is about doing a Roth conversion. The reason you cannot convert your RMD is because a conversion is a rollover and an RMD is not eligible for rollover. In addition, the first dollars you distribute in an RMD year are deemed to include the RMD, and therefore you cannot convert an amount before your RMD. You must take the RMD distribution first, and then if you want to convert additional amounts, you can. Of course, both your RMD and the additional conversion amounts would be taxable.
Permalink Submitted by dan casey on Thu, 2012-10-18 16:08
I’m NOT looking to do a conversion. I just want to take the RMD out of the clients traditional IRA account and he can deposit that into his checking account. And then he can mail me a check to put that money into his ROTH, right? Obviously he can only contribute $6k to a ROTH because he is over 50 and he is still working so we are good, right?
Permalink Submitted by Denise Appleby on Thu, 2012-10-18 16:27
[quote=”[email protected]“]I’m NOT looking to do a conversion. I just want to take the RMD out of the clients traditional IRA account and he can deposit that into his checking account. And then he can mail me a check to put that money into his ROTH, right? Obviously he can only contribute $6k to a ROTH because he is over 50 and he is still working so we are good, right?[/quote]
Yes. As long as his eligible compensation is at least the amount he wants to contribute and his MAGI does not exceed the Roth MAGI limit. For example, if he wants to contribute $6,000, his eligible compensation would need to be at least $6,000. MAGI limits here http://www.retirementdictionary.com/definitions/rothira
If both accounts are held with the same custodian, he can have the amount deposited directly to his Roth IRA (from his Traditional IRA)- if the amount is available in cash. He would just need to ensure that his objective is clear, so as to avoid errors. Completing a contribution form and attaching it to the request should help to ensure they understand what he wants to accomplish.