distribution out of traditional IRA to contribute to Roth

Submitted by Shahpar Naghshineh on Tue, 2009-01-06 23:40

my client is 74 and she less than 60 days ago did a distribution out of her traditional IRA for 17000. how much of that could she contribute to Roth. she does have earned income. her earned income was about 1000.00. she could not make contributions larger than 1000.00. could she?



Submitted by mk foss on Wed, 2009-01-07 00:44

Since a Roth contribution is not deductible, it isn’t relevant that she took a distribution from her traditional IRA. The Roth contribution is limited to earned income. At this time of year, she could make a contribution based on 2008 earnings and on 2009 earnings.

This assumes of course that she is within the modified AGI limits. If she’s over the limits, she could convert the Roth to a nondeductible IRA.

Submitted by Ruth Padorr on Sun, 2015-12-27 23:11

I am 74 years old and my accountant told me to take out 20% from my IRA’s and 401K to comply with the distribution requirements. I have been doing that. However,. I find myself putting this money in the savings in case I need it. Can I take out less and enable the 401K and IRA’s to keep on growing?

Submitted by David Mertz on Sun, 2015-12-27 23:50

  • Assuming that you will not reach age 75 in the next few days before the end of the year, the RMD amounts for 2015 are based on your life expectancy at age 74, 23.8 years.  (If you have a spouse who is sole beneficiary of your accounts and is more than 10 years younger, you can use an even longer life-expectancy period.)  Divide the balance that each account had on December 31, 2014 by 23.8 to get the required minimum distribution.  That works out to about 4.202% of the 2014 year-end balances.  The RMD calculated for the 401(k) must be taken from the 401(k), but the RMD amounts calculated for each of the traditional IRA accounts can be aggregated and taken from the IRA accounts in any combination.
  • You can refer to IRS Pub 590-B, When Must You Withdraw Assets, for the details of the calculation:  https://www.irs.gov/pub/irs-pdf/p590b.pdf  Your 401(k) plan uses the same calculation as is used for your IRA accounts.
  • To keep your 401(k) plan in compliance, your 401(k) plan is required to calculate your 401(k) RMD amount and make sure that at least that amount is distributed each year.  You can ask the plan administrator for the RMD amount that they calculated.
  • Your IRA custodians are required to calculate the IRA RMD amounts for you or offer to calculate the amounts for you upon request.

Submitted by Alan - IRA critic on Mon, 2015-12-28 00:29

  • Seems unlikely the accountant would be that far off regarding a fairly simple RMD calculation. It’s possible the accountant was referring to a % you need to withhold from your RMDs in order to avoid quarterly estimates or to otherwise to avoid a penalty for underwithholding. You might want to check back with him about that.
  • If distributions were received in the last 60 days, amounts in excess of your RMDs for each plan can be rolled back into your IRA. Only one IRA distribution can be rolled back within a 12 month period, but there is no such limitation on rollovers made from 401k distributions. Note that your first distributions in 2015 automatically apply to your RMDs for each respective plan, and you can only roll back amounts in excess of the correct RMD amount if you received a distribution in the last 60 days.
  • And if you have not yet taken out anything, you need to get on it tomorrow.

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