After you reach age 70 1/2, you must take required minimum distributions (RMDs) from your IRA. Suppose Paula Williams, age 76, has a $330,000 traditional IRA and a 22-year life expectancy this year, according to the relevant IRS table. Paula must withdraw at least $15,000 (1/22 of $330,000) this year and pay income tax on that amount.
Can Paula convert that $15,000 to a Roth IRA, as long as income tax has to be paid anyway? Inside a Roth IRA, that $15,000 can continue to grow, without further income tax, and Paula can withdraw any growth, tax-free, after five years.
However, the answer is no: taxpayers can’t convert an RMD to a Roth IRA. No matter how much you withdraw from an IRA, if you’re older than 70 1/2, the RMD amount is the first money that comes out.
Suppose, Paula converts $50,000 of her traditional IRA to a Roth IRA this year. The first $15,000 will be considered an RMD, so Paula will only have placed $35,000 into her Roth IRA. The other $15,000 probably will have to be pulled from the Roth IRA in order to avoid a penalty tax.
