RMDs, IRMAA and Roth Conversion
I turned 73 last month and have 2 IRAs in 2 different brokerage firms.
Can I just take 1 RMD from 1 IRA this year while take 2 RMDs from other IRA next year?
Does it matter if I take RMD this year from a smaller/larger IRA?
I estimated it will take 4-6 years to do annual RMD and Roth conversion while paying some IRMMA. In general, is it better/tax wise to avoid IRMMA at all cost or pay the price and get it over with? My goal is to leave as much asset to my heirs.
Permalink Submitted by Alan - IRA critic on Fri, 2024-05-10 17:03
RMDs for IRAs can be aggregated, which means that your total RMD can be taken in any combination from any of your IRAs. Most frequently, this is applied by taking the total RMD from just one of multiple IRAs. You must complete the total RMD for all owned IRAs before converting from any of them. If you want to also do any QCDs, you should also complete the QCDs before completing your total RMD. QCDs to any approved charity are more tax efficient than donating from your savings, particularly if you cannot itemize. Most seniors do not have enough itemized deductions to exceed the standard deduction.
Your question about IRMAA has no simple answer, but you could figure your IRMAA surcharge and convert it to a marginal tax rate to be added to your marginal rate without IRMAA. Conversions are often done up to the top of the current marginal rate, but the IRMAA tiers are totally different, resulting in added complications to determine the limits you want to convert. A further complication is that the IRMAA surcharge is applied using the MAGI from 2 years prior, so you know your MAGI, but you will not know what inflation adjustment is made to the IRMAA tiers until shortly before the IRMAA year starts.
Permalink Submitted by Undocumented Newcomer on Mon, 2024-05-13 20:12
Alan,
Your reply states, “You must complete the total RMD for all owned IRAs before converting from any of them.”
1.) Is this a change? I recall discussions from the past where it was OK to take the RMD from one IRA and then perform a Roth coversion from the same one before satisfying the RMD from another IRA.
2.) I presume that RMDs and Roth conversions from a 401k are independent from the IRAs; right?
Thanks for all you do.
Permalink Submitted by Alan - IRA critic on Tue, 2024-05-14 15:29
Yes, this is a change. Per p 254 of the IRS proposed Secure Act Regs, the IRS clearly states that the RMDs for all IRAs must be completed before a rollover can be done from any of them. This replaces the former Reg which only states that the RMD for “that IRA” must be completed before doing a rollover (conversion) from that IRA. Therefore, the prior flexibility has ended, or will end as soon as these Regs are finalized.
Correct
Permalink Submitted by B Lee on Thu, 2024-05-23 23:11
I like to clarify my original Q1.
Q1 – Firm A calculated my IRA RMD for 2024 to be $2,000. I estimated 2025 RMD to be around $2,100.
Firm B calculated my IRA RMD for 2024 to be $20,000. I estimated 2025 RMD to be about $21,000.
Will IRS allow below:-
For 2024, from Firm A, I will take 2024 RMD, but NONE from Firm B
For 2025, from Firm A, I will take 2025 RMD. From Firm B, I will take 2024 RMD, then 2025 RMD. Afterward, I will do some Roth IRA conversion either from Firm A or Firm B only if it will NOT land me in next tier IRMMA.