I am self-employed and do not need most of my IRA RMD for expenses. Can I reinvest it in Roth IRAs?

By Denise Appleby AAA
A:

You can use your required minimum distributions (RMDs) to fund your Roth IRA as a Roth IRA contribution. This is because the source from which you take the cash to fund your IRA can be from any pool of cash that you have. The IRS' requirement is that you have enough taxable compensation to cover the contribution, but the actual deposit of your contribution need not come directly from your paycheck.

If you can afford to pay the taxes, you may want to think about converting your Traditional IRA to your Roth IRA. Once the funds are in the Roth IRA, you will no longer be required to withdraw RMD amounts. Of course, you should check with your tax professional to determine whether a conversion would be a good financial move for you, as there are other factors to consider other than the RMD issue. If you do decide to convert to a Roth IRA, remember to take your RMD for the year you convert before the conversion.

To learn more, read Avoiding RMD Pitfalls.

This question was answered by Denise Appleby.

RELATED FAQS

  1. Places where I can open an IRA Account?

    Open an IRA through brokerage firms, mutual funds, banks and other major financial institutions, or through large Internet ...
  2. What rate of return should I expect on my 401(k)?

    Learn what factors affect your 401(k) performance, and understand what a typical rate of return is for employer-sponsored ...
  3. How can an entrepreneur save for retirement?

    Learn about the retirement savings plan options for entrepreneurs and small business owners, including administration and ...
  4. What would privatized Social Security mean for Americans?

    Take a deeper look at how a privatized Social Security system would work, including looking at a real example that's existed ...
RELATED TERMS
  1. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  2. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  3. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  4. Gold IRA

    Definition of Gold IRA
  5. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  6. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...

You May Also Like

Related Articles
  1. Retirement

    Top 10 Stocks for Retirement Portfolios

  2. Trading Strategies

    Top 7 Roth IRA Stocks for 2015

  3. Options & Futures

    Options and Roth IRAs: Do's and Don'ts

  4. Professionals

    Are Longevity Annuities in 401(k)s a ...

  5. Professionals

    Why Retirement Advice Is Better But ...

Trading Center