For Roth trans Can the MRD for seniors be subtracted from the required AGI requirement to be less than 100000

Question

For Regular IRA tranfers to a Roth IRA for seniors over age70.5 can the minimum distibutions from retirement accounts (MRD) be subtracted from the adjusted AGI requirement of $100000 maximum.

Answer 1

Yes. Neither the Required Minimum Distribution nor the amount you convert to a Roth figures into the income limits for the conversion (currently $100,000).

Example 1.

1. Your income from wages and after-tax investments is $75,000.

2. Your Required Minimum Distribution is $50,000

Your total is $125,000 but you do not include the $50,000 Required Minimum Distribution when you figure your eligibility for a Roth converson. You can make the Roth conversion.

Example 2.

Your income from wages and after-tax investments is $50,000

Your Required Minimum Distribution is $10,000

Your Roth Conversion is $60,000.

Your total is $120,000, but the conversion is allowed since you ignore the RMD and conversion, and you have other income of $50,000 which is below the allowed maximum of $100,000.

As you probably know, the $100,000 ceiling disappears on December 31, 2009.

Answer 2

Your question is a bit confusing.

However, when you make such a rollover, you are paying tax on the money pulled out of the regular IRA. There may be some other financial tools that may make sense for this money, since I get the impression from the question that this is money you have no current need for. There are some options that are tax-free, as well. About the only thing that's good about sticking the money back into a Roth is that it, too, is tax free growth and withdrawal.

Yes, the RMD _IS_ disregarded when looking at the $100K MAGI limit for determining if you can roll to the Roth since the 2005 law.

WealthBuilder
Enrolled Agent / Financial Specialist

Answer 3

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