Roth Covversions after age 72
I just wanted to verify two things about a Roth conversion. 1. A person can do a conversion after the age of 72years old –but they have to take out any RMD that is do for the year of the conversion?
2. Based on the question above– what happens if I take the total RMD from another account —not the traditional IRA that I’m converting. Client has multiple Traditional IRAs.
3. Is the answer to the question in the workbook we received when I took the Class last yr. if so please me page number or reference.
Permalink Submitted by Alan - IRA critic on Mon, 2022-02-07 19:49
Yes, before doing a conversion from any IRA account at 72 or later, the RMD for that account must be completed first UNLESS you have completed your total RMD from other IRA accounts.
As above. If you complete the total RMD for all accounts which includes the RMD for the account you wish to convert, you can then convert the IRA that has not yet distributed anything.
I do not have those materials as I am not a Slott employee.
There is an associated strategy for those who want to convert early in the year and take their RMD later. That involves partitioning the IRA by direct transfer to include an IRA account that holds only the amount you wish to convert and enough for the RMD for that account. The partitioning takes place late in the prior year, probably mid December. Then early the next year the RMD for the selected smaller account is completed and the conversion right afterward. The conversion therefore occurred early in the year and you can then complete the RMDs for the other accounts late in the year and perhaps withhold enough from those RMDs to cover the tax due on both the RMDs and conversion.
The above strategy hinges on IRS Reg 1.408-8, QA 4, which states that an amount cannot be converted until the RMD “for that IRA (meaning that particular IRA account) is completed. You do not have to complete the RMDs for the other iRA accounts before converting from the account for which the RMD was completed.