RMD
Have a client who just turned 72 (2021). Has sizable IRA and wants to convert it all to Roth this year (rather that is a good idea or not is a different question). Since he can wait until April 1, 2022 to take first RMD, if he converts it all this year, what happens? Does he need to hold back the RMD so he can take in 2022 (before April 1) or is he allowed to convert it all this year and not worry about the RMD in 2022 before April 1? Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2021-08-23 23:55
A conversion is a distribution and rollover, and in an RMD distribution year (2021), the 2021 RMD must be completed before any amount is converted. That applies even though his RBD is 4/1/2022.
If he does not want to take the 2021 RMD until 2022, then he cannot convert and must take both the 2021 and 2022 RMDs before converting in 2022. Or if he takes his 2021 RMD this year, then converts the entire remainder this year, there will be no RMD for 2022.
Perhaps he should consider taking the 2021 RMD this year and convert half of what was planned, and then take the 2022 RMD next year and convert the other half. His 2022 RMD will be reduced since his 2021 RMD and the 2021 conversion will reduce his balance. Really, if a very large conversion is even beneficial he might have done it in 2020 before his RMDs started. But it all depends on how all his income and deductions total out for this and next year.
The first RMD Distribution year has the one time deferral option, and it creates some planning challenges.