Inherited IRA question
I have a client who has an Inherited IRA pre-secure act. They need to take an RMD this year. They want to make a Roth contribution. I believe they need to take the distribution first and move into either a brokerage account or a bank account and then make a Roth contribution. Is this flow correct?
Permalink Submitted by Alan - IRA critic on Mon, 2023-12-04 17:32
No. They can make a regular Roth contribution anytime if they meet the earned income and MAGI limit requirements. This is not related to the timing of RMDs on inherited IRAs. Note that an inherited non spouse IRA cannot be converted to an inherited Roth IRA.
Permalink Submitted by Robert Roselli on Mon, 2023-12-04 18:18
I didn’t phrase the questions correctly. My client has an RMD from their Inherited IRA of $ 6,500. They are working so I know they can make a Roth contribution. I don’t think I can move the funds directly from the Inherited IRA to the Roth. I beleive I have to move the money from the Inherited IRA to a brokerage account or a bank account and then make the contribution from one of those two to the Roth. Is this correct?
Permalink Submitted by David Mertz on Mon, 2023-12-04 19:26
It’s just cash. Cash can be moved from the inherited IRA directly to the Roth IRA as long as the custodian understands and reports it as a regular distribution from the inherited IRA and a regular contribution to the Roth IRA.
Permalink Submitted by Robert Roselli on Mon, 2023-12-04 19:32
To see if we need to make the extra transaction. However, once the client retires, I don’t think they can move funds from their Inherited IRA to their Roth IRA anymore, is that true?
Permalink Submitted by Alan - IRA critic on Mon, 2023-12-04 20:00
Yes, if they have no earned income or a spouse has no earned income from which to make a spousal contribution, client can no longer make a regular Roth contribution. But if they have an owned IRA, they could still convert to a Roth IRA.