Jul 14

I recently fielded this multi-part question;

First, is conversion from a traditional IRA to Roth IRA still OK when over 70 and taking RMDs (required minimum distributions)?

Ok? It’s fantastic!! I will first tell you that I believe that Roth’s value while working is slightly exaggerated. Your scenario above is ideal. I have an 80+ yr old client who is in the 15% bracket. Each year we convert just enough to ‘top off’ that bracket so the next hundred dollars would have been taxed at 25%.

Second, does the “conversion” count as part of RMD?

No, the conversion must take place after you calculate the RMD. Our RMD is based on 12/31/07 year end balance. We can do the Roth conversion any time during the year, but that RMD is fixed.

Third, is it possible to transfer stock directly from Traditional IRA to Roth IRA — using current valuation on day of transfer as the basis for amount of conversion?

Yes – you can convert stock, the broker will report that value based on the day of conversion. There is no wash sale selling in one IRA and buying in another, anyway.

Joe

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2 Responses to “Converting to Roth after age 70”

  1. Ken Says:

    Would you recommend that a 68 year old person transfer a significant amount of their traditional IRA to a Roth, to reduce future required distributions?

  2. JOE Says:

    I’d suggest that you look at Fairmark.com to help you determine your current marginal tax bracket. Only convert enough to ‘top off’ that bracket, although if the IRA is pretty substantial, going from 25% to 28% isn’t that great a loss, but those who are in the 15% bracket really should avoid converting right into the 25% rate.

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