Ask the Expert: Rules for RMDs deposited in a non-IRA account
You recently explained that one can’t transfer (“convert”) any part of the required minimum distribution from a traditional IRA into a Roth IRA. Are the key words “transfer” and “convert”? My husband, age 72, currently deposits RMDs from his IRAs into his savings bank account. He’s still working and has earned income. Can’t he then take money from his savings bank account to open a Roth IRA somewhere?
Indeed, he can.
You’re right that the key words in my earlier column were “transfer” and “convert.” Your husband can’t transfer his RMD directly from his traditional individual retirement account to a Roth IRA — a transfer known in tax jargon as a conversion. “But after the money comes out of the IRA and goes into a non-IRA account, he can do anything he wants with it,” says Ed Slott, a Rockville Centre expert in financing retirement.
There’s no maximum or minimum age limit for contributing to a Roth IRA, provided you have earned income. The maximum contribution this year is $6,000 if you’re under 50, or $7,000 if you’re 50 or older.
Two caveats: You can’t contribute more than your annual earned income. (You can contribute to a Roth for a minor child because there’s no minimum age for the account, for example, but you can’t put in more than the child earned.)
And you can’t contribute the maximum amount unless your modified adjusted gross income is under $129,000 if you’re single, or under $204,000 if married and filing jointly. If your income is $144,000 or more (single) or $214,000 or more (married and filing jointly) you can’t contribute anything to a Roth IRA.
The bottom line
You can’t directly transfer your RMD to a Roth IRA. But you can transfer money from a non-IRA account to a Roth IRA, assuming you meet Roth eligibility requirements.
