Transfers and RMDs
I am now 70 and must start taking RMDs by April 1, 2016. I plan to take the first RMD by Dec. 31, 2015. I realize that I cannot convert RMD monies to the Roth. That money must be separate from the RMD. Can I convert money from my T-IRA to my Roth before I take the first RMD? I plan to repeat that process as time goes on. I also want to transfer securities in-kind from the T-IRA to the Roth rather than sell and re-purchase. Please provide insights into these issues. Many thanks!!
JWW
Permalink Submitted by Alan - IRA critic on Wed, 2015-02-04 04:25
Because the first distributions you take in an RMD year are deemed to apply to the RMD, you cannot convert before fully satisfying the RMD. An RMD is not eligible for rollover and a conversion is a rollover. Therefore, in 2015 you must first satisfy your entire 2015 RMD and then you can convert any additional amount that you wish. The fact that your first RMD can be deferred to 4/1/2016 does not change the fact that 2015 is your first RMD year and the first dollars distributed are the 2015 RMD. As for in kind distributions, you can elect to take your RMD in kind by distributing shares to a taxable brokerage account, where they will have a cost basis equal to the value per share upon distribution. You can also convert in kind by transferring shares to your Roth IRA after your RMD has been satisfied. In the event you are considering a QCD if the QCD is extended, you have other timing requirements if you want your QCD to cover your RMD.
Permalink Submitted by Jeff Watkins on Wed, 2015-02-04 21:07
Thank you very much Alan. What is QCD?Jeff
Permalink Submitted by Alan - IRA critic on Wed, 2015-02-04 22:01
Qualified Charitable Distribution. A distribution from your IRA after 70.5 made out directly to the charity. It counts toward your RMD.