Can you Roth Convert While Taking RMD? | Financial Advisor | Christy Capital Management

Описание: We have a lot of videos on doing Roth conversions to try to minimize RMDs or even Roth convert so much that you don’t even have an RMD. But let’s say you didn’t accomplish that and are receiving RMDs now. Can you do a conversion?

One of the ways, in my opinion, to have a better retirement is to try to get your tax planning in order before receiving RMDs. Depending on your age, your RMD will start at age 72, 73, or 75. That is when you are forced into taking distributions from your traditional retirement accounts like traditional TSP and traditional IRA. That distribution is taxable. It would be taxed at whatever your tax bracket rate happens to be when you take the distribution.

Here are a couple reasons why you’d want to do that. RMD creep can be an issue. The percentage you have to take out gets higher every year and is also based on the current balance at the end of each year. There are times when the balance is getting larger and the percentage is getting larger which means the RMD gets larger. So if you have slight tax issues when your RMD starts, they could turn into real issues 10 or 15 years later if everything is growing.

To answer the question-- can you do a Roth conversion while receiving your RMD. You can. You are still able to Roth convert amounts from traditional to Roth. The one exception is that you can’t Roth convert your actual RMD. If your RMD is $20,000 for the year, you still have to take a $20,000 distribution. If you want to do a Roth conversion on top of that you can, but the actual $20,000 has to come out and be distributed, it cannot be converted. So if you’ve made it to RMD age and your RMDs are larger than you want, you have to take the RMD for the current year but you could also do a conversion every year so that overtime you can either lower or eliminate the RMD.

In a perfect world, you would’ve done this planning prior to showing up at RMD age. But it’s never too late to start tax planning.

The information provided is not intended as tax or legal advice. Figures shown are for illustrative purposes only furthermore, the information nor the illustrations provided may not be used to avoid any tax penalties. This content represents the general views of Christy Capital Management and should not be regarded as personalized investment advice Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice. Retirement Benefits Institute, Inc., and a portion of its contents merged with Christy Capital Management Inc. Brandon Christy, former President of Retirement Benefits Institute, is also the current President of Christy Capital Management, Inc., a registered investment adviser.