Non RMD IRA withdrawal to rollover Roth

[roach711]

I turn 72 this year (2023) so not required to take traditional IRA RMD’s until 2024. However, this year I’m going to take a non required distribution from my IRA, just enough to keep me in the 12% tax bracket.



I know that I can’t roll an RMD directly into a Roth but would have to withdraw more over and above the RMD from the IRA to roll into a Roth.



My question is, since this isn’t technically an RMD this year can I roll this one entire distribution into a rollover Roth IRA?

 

[RunningBum]

Yes, it's called a Roth conversion.

 

[Morgan22]

You can usually do a Roth conversion online at most brokerages. Just google for your brokerage.
Fidelity's instructions: https://www.fidelity.com/retirement-ira/roth-conversion-checklists

 

[Al18]

FYI at Fidelity you will need to call them if you want to withhold taxes from the RothIRA conversion.

 

[Animorph]

There's still plenty of time to schedule estimated taxes to cover a Roth conversion using taxable account money. That keeps all your eligible retirement account funds in a tax-advantaged retirement account. Not a bad time to do it now with the market still down.

 

[roach711]

Thanks for the advice everyone! This is our first year without earned income so I'm going to start IRA withdrawals early before RMDs kick in next year.

 

[donheff]

Calculate the amount that will take you to the 12% limit. Calculate the taxes due on that amount. Subtract the taxes from the total and convert the remainder. Then (before the end of the year) take a distribution for the tax amount and set it to 100% withholding.

 

[roach711]

Calculate the amount that will take you to the 12% limit. Calculate the taxes due on that amount. Subtract the taxes from the total and convert the remainder. Then (before the end of the year) take a distribution for the tax amount and set it to 100% withholding.

That's pretty much been my plan but it brings up another question. If I did my conversion early in the year and took the distribution for the withholding late in the year would I be required to make quarterly tax payments?



My IRA is with Merrill Lynch and they make it easy to do the withholding along with the conversion.



This RMD thing is such a total turn around in our mind set. We've always been savers and have done fairly well with our investments. Way back we assumed that SS wouldn't be there for us when we retired and saved accordingly. Now, holy crap! Our SS pretty much pays our expenses and we have dividends and IRAs and capital gains coming at us! Add to this that I really despise sending money to the damn gummint. Yeah, I know, it's a first world problem and I'll likely get over it. I do enjoy the research and will certainly do what I can to screw Uncle Sam.

 

[donheff]

That's pretty much been my plan but it brings up another question. If I did my conversion early in the year and took the distribution for the withholding late in the year would I be required to make quarterly tax payments?

No

 

[braumeister]

If I did my conversion early in the year and took the distribution for the withholding late in the year would I be required to make quarterly tax payments?

No

It's a little quirk in the IRS code that some of here have taken advantage of for years.

Anything that is withheld, from anywhere (as opposed to being paid any other way) is considered to have been withheld evenly throughout the year.

 

[Alex The Great]

Calculate the amount that will take you to the 12% limit. Calculate the taxes due on that amount. Subtract the taxes from the total and convert the remainder. Then (before the end of the year) take a distribution for the tax amount and set it to 100% withholding.

But it would work for those older than 59.5 only, correct?

 

[Al18]

But it would work for those older than 59.5 only, correct?

True. Any withdrawals from an IRA before 59 1/2 would trigger the 10% early withdrawal penalty.