403 b to Roth IRA
My wife turns 70 1/2 in December of 2021.
She wants to convert her 403 b to a Roth IRA.
Does she have to do that before she turns 70 1/2 OR can she convert it to a Roth IRA
before April 1st of 2022? IF its the latter, that gives her 1 extra tax year to convert
her 403 b account……
Permalink Submitted by Alan - IRA critic on Thu, 2018-12-06 17:03
While she can convert during an RMD distribution year, the RMD must be completed before any conversions are done. Since the first RMD distribution year is the year in which she will reach 70.5, conversions are better off done prior to Jan 1, 2021. As of that date, she would have to complete her RMD for the year before converting additional amounts, and both the RMD and the additional conversion would be taxable, possibly increasing your marginal tax rate. Prior to 2021, she can also do a direct rollover to an IRA without an RMD being distributed. Having this money in an IRA will make partial conversions easier, since if the 403b is not small, she would probably only be doing incremental conversions each year to control your joint marginal tax rate. She would not benefit from converting amounts taxed at a higher rate than your average rate throughout retirement, would benefit if the conversion tax rate was lower, and if the rate was about the same, it could work either way depending on variables.