<#-- Rebranding: Header Logo--> <#-- Rebranding: Footer Logo-->

Can required minimum distributions from a 401(k) be transferred to a Roth IRA?

I will be 70.5 years old this April. I have $110,000 In my 401(k). I’m debt free with an AGI of $80,000. I have a 1.5 year emergency fund and two annuities valued at $350,000 (both have a five-year surrender period remaining). Since I will be taking RMDs this year, I was wondering if I could transfer the 401(k) RMDs to a Roth IRA and if it would provide any tax benefits in the future over a brokerage account? I assume I still include the amount as income even if I move it to a Roth? I plan to use a portion of the annuity RMDs as a qualified charitable contribution to offset my AGI some. Other than this, I’m not sure what other options are available to reduce my tax burden.

Debt, Financial Planning, 401(k), Annuities, IRAs
Answers
Sort By:
Most Helpful
2 weeks ago

Hello,

That’s why I always encourage pre-retirees to plan ahead, 5- or 7-year prior to their first RMD; otherwise, there’s not much wiggle room to reduce your tax burden.

Based on your description, your AGI is $80k.  If you’re filing as single, you will have the problem with the Medicare premium surcharge sooner enough.  Above $85k, your Medicare part B will increase to $189.60/mo. vs. the standard $135/mo., so will be your part D premium. 

You asked about conversion.  Because of you turn in 70 ½ in April, your RMD literally starts this year.  Even though you can delay to April 1, 2020, you’re not off the hook.  Assuming your RMD for 2019 is $4,015 ($110k/27.4), you need to withdraw that amount first before you can convert the rest of $105,985 to Roth.  However, when you do, that entire amount plus your regular AGI of $80k would push you to the 4th tier, the second highest tier for the Medicare part B premium at $433.40/mo.

Since you’re charitable, you can directly transfer your RMD as the QCD to the charity, and then work with your tax advisor (EA, CPA, etc.) to see a systematic Roth conversion feasible.

Does that sound like a plan?  Best!

Hello,

2 weeks ago
3 weeks ago
3 weeks ago