Roth IRA

[TAX4US]

TP 80 yrs old, no earned income gets RMD from reg IRA. Bank tells him to put it back into a Roth IRA and he does. Pays tax on the RMD. I thought you had to have earned income to even do a Roth. I believe he can convert the reg IRA as long as he pays the TAX but not the RMD amount. Am I missguided. BTW I saw the Bank statement and it plainly states Roth contribution. Opinions please.

[Matt Sova]

rollover

None of a RMD from a traditional IRA is eligible for a rollover into another IRA. The question then becomes can you do a conversion from a traditional IRA to a Roth IRA? This I am unsure of at this point. If you want to make a Roth contribution (which is different than a conversion) you can do that if you are 80 as long as you have earned income.

So that brings it down to the basic question of can you do a conversion to a Roth for your RMD? That I do not know. Perhaps someone else has some guidance and a cite that we can look at.

[Peachie]

Let me just say this:

TP 80 yrs old, no earned income gets RMD from reg IRA. Bank tells him to put it back into a Roth IRA and he does. Pays tax on the RMD. I thought you had to have earned income to even do a Roth. I believe he can convert the reg IRA as long as he pays the TAX but not the RMD amount. Am I missguided. BTW I saw the Bank statement and it plainly states Roth contribution. Opinions please.

No earned income-no Roth contribution. I would suggest removal of contribution and the earnings. 1099R will reflect transaction next year. The other question-I can give you no answer.

Peachie

[taxxcpa]

I don't think converting all or part of an IRA to a Roth counts as part of the RMD.
If you have enough earned income, you could do it as long as it did not exceed other limitations.

[Matt Sova]

I don't know

There is no rule that says "You have to have earned income to convert dollars from a traditional IRA to a Roth IRA". The rules say that you have to have earned income to make any sort of IRA CONTRIBUTION. The rules also say that you can NOT rollover your RMD into an IRA to avoid paying tax on your IRA.

The question is Can you take your RMD, PAY the taxes on it by CONVERTING it to a Roth? Earned income has nothing to do with it.

[Matt Sova]

Answer

I did some research on this and it appears that you cannot take your RMD and convert it to a Roth. This in essence would be a rollover of the RMD which is disallowed.

Sounds like he has to undo the Roth amount.

He could take his RMD in 2013 and roll the balance into a Roth, but he is 80 years old, would he really benefit from that?

[ddoshan]

Concur with Matt no can do.
For good but a little confusing information google rmd roth conversion and look for Fairmarks explanation as to the whys and wherefores and pitfalls on this.

[TAX4US]

Hey Thanks to all. I thunk I was right on this. But I wanted to be sure before I approach TP and Bank for letting him do this. I can only hope tp didn't do this in prior years. IF so what a mess I am about to have.

[Roland Slugg]

Which banks are these whose people are telling their older IRA customers this nonsense??? This identical thing comes up several times each year on this forum, and I am always shocked to read about it. But then many of the people who replied here didn't know or weren't sure, either, so I guess I shouldn't be too surprised.

As a group, it's been my experience that CFPs are the best informed about IRA issues, including rollovers, conversions and RMDs ... and bankers are the least informed. IMO when banks misinform their customers about things such is this, the bills to correct should be sent to ... THEM!