Can Rollover IRA RMD be put into Roth IRA?
I have a Rollover IRA (rolled over from my 401(k)) and a Roth IRA. I know that there is no RMD requirement for my Roth IRA and that the money I withdraw from it is tax free. My question is this: When I start taking my RMD’s from my Rollover IRA at age 70 1/2 and pay the taxes on it, can I then put the money withdrawn (all or part of it) into my Roth IRA? And will this money have the same advantages – no RMD, no taxes upon withdrawal – as the money I have already contributed to my Roth IRA?
Permalink Submitted by Jose Morales on Thu, 2011-07-14 16:33
Mandatory distribuitons are never eligible for rollover. If you have earned income within the MAGI limits you can make a new Roth contribution.
Permalink Submitted by Jane Ackerman on Thu, 2011-07-14 21:11
My RMD’s will start in 2015. If I take some money out of my Rollover IRA each year before 2015 and pay the taxes on it, can I put that money into my Roth IRA?
Permalink Submitted by Jose Morales on Thu, 2011-07-14 21:31
That would be considered a conversion, and yes you could do this. Whether this is a strategy you want to take advantage of is something you should speak to a financial advisor or estate planner to.
Permalink Submitted by Alan Spross on Thu, 2011-07-14 23:38
You can also convert after RMDs begin:
1) The RMD must be taken out before any conversion is done from additional distributions
2) Your tax bill will include the taxable RMD amount plus the taxable conversion amount
But:
1) Your future RMDs will decrease from what they would otherwise have been in general proportion to the amounts converted.
2) You will have a choice to distribute from the Roth if you need income in excess of your RMD without taxes or affecting taxation of SS income
Largest factor to determine whether you should convert remains the tax cost of the conversion vrs the future tax reduction as a result of the conversion. The older you get the more you might factor in the future tax impacts for your beneficiary in addition to yourself.