- posted
10 years ago
IRA MRD question
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- posted
10 years ago
'rates going up' won't necessarily hit everyone. I doubt those in the
10-15% bracket have a high risk for their tax rate to go up soon. The 2014 rates are already announced. On Jan 2, 2014, why not take your RMD, and then convert a chunk to Roth? By tax time 2015, you'll know if there are new higher rates that will impact you, or not. If not, and the investments converted have gone up, look at the tax bill compared to the current value. If the investment dropped, just characterize.- Vote on answer
- posted
10 years ago
On 12/2/13 2:58 PM, JoeTaxpayer wrote: The
By law you can not rollover an RMD to a Roth IRA.
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- posted
10 years ago
RMDs cannot be rolled over to another traditional IRA or _converted_ to Roth IRAs, can they? If the OP has earned income (possibly not at age 77), a Roth _contribution_ could be done, but not a rollover of the RMD. Any amounts distributed in _excess_ of the RMD could be converted to Roth IRA but not the RMD.
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- posted
10 years ago
Ok. Bad syntax. First take your RMD. Done. Then look at your Traditional IRA balance and consider converting a chunk of that remaining balance .........
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- posted
10 years ago
Why do you think that? I agree there's a substantial risk of tax increases for some taxpayers, but it's not typical for retirees to face high tax rates. My first assumption would be the opposite, that there's a higher probability of paying too-high a rate if you accelerate IRA distributions. You could increase your adjusted gross income or taxable income to the point where you have an unusually high rates because of a higher tax bracket, plus phase-outs, lost credits and deductions, etc. And once out of the IRA, depending on the types of investments you own, you might face higher taxes on the investment income when you reinvest the proceeds using a taxable account (if not from dividends & interest, then from capital gains in future sales).
Of course...it's entirely specific to each individual which is why it's essential to run a tax projection with real numbers. If the higher IRA distributions won't be taxed at all currently, there's more of an argument for doing it.
-Tad
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- posted
10 years ago
. . .
This was similar to what I tried to suggest. You are right, the question can't be answered without more details.
I circle back to partial conversions only for the fact that (a) they are reversible, and (b) they can top off the bracket each year and help avoid RMD creep.
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- posted
10 years ago
Joe has it right, but be sure to pay your taxes on the conversion with non-IRA money.