Traditional IRA to Roth IRA Conversion
I am 75 years of age. I recently converted $100K from a Traditional IRA to Roth IRA. I am now reading that the IRS requires you to take your RMD for the year from your Traditional IRA prior to converting any funds to a Roth IRA. And it goes on to say that the converted amount and earnings are considered an “excess contribution” and should be withdrawn.
I have been informed by a couple of advisors that I can go ahead and leave the Roth IRA as is and take my RMD for the year from other Traditional IRAs that I own so that I meet my RMD requirements. Is that accurate?
Permalink Submitted by Alan - IRA critic on Mon, 2025-06-09 14:38
What you read is correct. What those advisors have indicated is not accurate as far as the IRS is concerned, but you might get away with it because the IRS does not receive the dates for either the conversion or the RMDs, so would not typically know that you did these out of order.
Tax law indicates that the first distributions (and a conversion is a distribution) in an RMD year are treated as RMDs. That means that the conversion (if large enough) distribution will satisfy the RMD, but the amount of the RMD will become an excess regular contribution to the Roth IRA, and must be removed with allocated gains. This is not at all costly, but it does create filing issues, explained as follows:
Say your RMD is 30000, but you converted 50,000. You would have to report 50,000 as taxable income, 30,000 for the RMD and 20,000 for the conversion. Then you would have to explain to the Roth custodian that you converted 30,000 that was your RMD, and it must be treated as a regular excess IRA contribution and returned to you net of gain or loss. If you then still wanted to have a 50,000 conversion, you would have to convert another 30,000, leaving you will a taxable RMD of 30,000 and a conversion of 50,000. Taxes due are about the same as if you did this in correct order, but the tax reporting is a hassle and the Roth 5498 will show a conversion contribution of 80,000, which might confuse the IRS.