Does my mother need to take an RMD from her IRA or can she just convert it to a Roth IRA?
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Anonymous
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My mother has an IRA she uses for a backdoor Roth IRA. She normally puts money into the IRA and immediately converts it to a Roth. However, she was preoccupied with my father's health and forgot to do so for her 2023 and 2024 IRA contributions.
She will turn 72 this summer. Can she convert it now to an IRA (paying taxes on the gains) or does she need to first take an RMD and then convert? (Not sure how the conversion gain would be calculated in that instance.) The amount in question is small, about $25,000, but I know the RMD rules are pretty strict. Further question: Even though she is turning 72 this year, can she still make IRA contributions and immediately do a backdoor Roth for 2025 and outgoing years? Perhaps relevant--she is still working but has an employer 401k. I do know that RMDs are not required for that as long as she is still working for the same employer. |
Anonymous
| Why is a 72 year old making Roth contributions in the first place? |
Anonymous
Lol! One could ask! Her investment goal she says is to leave as much as she can for her kids to inherit. |
Anonymous
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You cannot make contributions for 2023 and 2024. If you had made the 2023 contribution before April 15 of 2024 and the 2024 contribution before April 15 of 2025 you would be fine. That said, you can now make the contribution for 2025, but must pay the taxes on the money you convert to the Roth. |
Anonymous
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Working means you don't have to RMD the employer 401k. You have to RMD IRAs, I think. Not Roths.
She must have invested well if 2023 and 2024 IRA contributions capped at $15.5k are now $25k. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits |
Anonymous
| Since she is still working she can make Roth contributions up to the whatever the limit is now assuming she is earning that much money (or she can put in up to the amount she earns if it is less). |
Anonymous
Not clear what the $25K represents.. Is it the money she contributed to an IRA but did not convert to Roth? If that's the case, she can convert it to Roth any time. RMD and backdoor roth are two different things. RMD is age driven and this backdoor process is not impacted by RMD requirements. |
Anonymous
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RMDs aren't due until 73 now so if she turns 73 in 2026 then her first RMD will be due April 1, 2027 based on her IRA balance as of Dec 31, 2025, and she still has time to convert the IRA.
Don't take my word for it though-- https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:text=You%20must%20take%20your%20first,by%20Dec.%2031%2C%202025. |
Anonymous
It means OP here. This is a most helpful answer. It means if she converts now to a Roth, there is no question of an RMD. If she is still work next year, I will remind her to backdoor her IRA contribution to the Roth immediately. Thanks! |
Anonymous
That makes the Roth make less sense. Cost basis restarts at death and there's no cap gain. Take the tax break now. |
Anonymous
But there is ordinary income tax owing on the distribution. That makes the basis irrelevant and is drastically higher than capital gains taxes. |
Anonymous
Cost basis of what? |
Anonymous
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Most investments (all) have a stepped up basis at death.
This new basis is less relevant with an IRA, as the taxes are assessed as ordinary income, not as capital gains. |
Anonymous
IRAs do not get a step up in basis |
Anonymous
| How much does she make that she cannot do Roth right away? Why backdoor? |