Ask the Expert: Can I convert a required minimum distribution?
No. Moving an RMD you don’t need to live on into a Roth IRA is a nice idea, but it’s not an option.
You can’t transfer (aka “convert”) any part of your RMD into a Roth IRA. If you want to do a Roth conversion after age 72, you must take your RMD first. Then, in a second distribution, you can convert some of your remaining IRA balance into a Roth IRA. That’s an expensive strategy because both distributions are taxable.
Let’s say your RMD is $20,000 and you’ll owe a $5,000 tax on it. None of the $15,000 RMD after-tax balance can be converted to a Roth IRA. To generate $15,000 for a Roth conversion, you must take a second $20,000 distribution — and pay another $5,000 of tax on it.
If you don’t need your entire RMD for living expenses, you may want to consider a different plan: Have your IRA make a Qualified Charitable Distribution to an eligible charity. A QCD counts toward your RMD, and it isn’t taxable.
Going back to my example, your RMD is $20,000. If your IRA makes a $7,500 QCD to your favorite charity, you only need to withdraw an additional $12,500 to fulfill that $20,000 RMD obligation — and only $12,500 will be added to your taxable income.
This strategy is available to everyone over 70½, and it’s particularly appealing for taxpayers who don’t itemize deductions. In next week’s column, I’ll explain why.
The bottom line
You cannot convert part of your RMD to a Roth IRA.
