RMD order rules during a IRA conversion to Roth

Submitted by Jamie Upson on Mon, 2020-01-13 15:36

We have a client who has two IRA accounts. The client is 80 years of age. He wants to convert the full amount in one of his IRA accounts to a Roth. The IRS says that distributions from IRA accounts are treated as satisfying the RMD first so we need to take the RMD before we process the conversion. My questions are:

The client has plenty of money in IRA #2 to satisfy the RMD for both IRA accounts, I presume that doesn’t matter and we still need to take the RMD before we convert?
Is the RMD that must be satisfied ONLY the RMD for IRA #1 that we plan to convert to a Roth or is the RMD that must be satisfied the aggregate of both IRA accounts that must be met before we convert IRA #1 to a Roth.
Thank you.



Submitted by Alan - IRA critic on Mon, 2020-01-13 16:04

  • The RMD for the IRA account to be converted must be completed before the conversion, but that RMD can be satisfied by distributing it from another IRA account. IRS Regs say that a distribution (conversion) cannot be rolled over until the RMD for “that IRA” is satisfied. Therefore, the total RMD for all IRAs need not be complete as long as the RMD for the IRA to be converted has been completed, regardless of which IRA that comes from.
  • Client RMD options therefore include:  1) Complete total RMD from IRA #2, then convert IRA #1.  2) Complete RMD for IRA #1 only, then convert the rest of IRA #1, then complete the RMD from IRA #2.  
  • By partitioning IRA accounts prior to end of prior year, it is possible to set up the accounts so that a conversion can be done early in the year with no withholding, while the remainder of the RMD can be done toward the end of the year with withholding to cover both the RMD and the conversion. This gets funds into the Roth IRA earlier and allows taxpayer to hold on to tax money longer. But it takes careful planning.

Add new comment

Log in or register to post comments