Ask the Hammer: Where Can I Invest My RMD?

Ask the Hammer: Where Can I Invest My RMD?

Ask Bob: Can I Roll My RMD into a Roth IRA?

A reader is confused about when and if he can contribute his RMD to his Roth IRA.
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Question

I saw that you have said that one cannot take an RMD and roll it over into a Roth IRA. I'm a little unclear about what you've said. Can one, if one pays the taxes on the RMD then roll it over into the Roth regardless of earned income? If it cannot be rolled over, can a portion of it be contributed to the Roth, assuming that one meets the earned income requirements, and it is at or below the contribution maximum?

Answer

According to the Internal Revenue Service in Publication 590-B, a required minimum distribution (RMD) cannot be rolled to another tax-deferred account, says Robin (Ruth) Delaney, CFP®, Concierge Financial Organization, Inc. That includes a Roth IRA.

Delaney explains, “If you have earned income and you qualify under the income limits to make a Roth contribution, you may do so at any age up to the limits for Roth contributions. The process would be to deposit your RMD into your checking account and then make a Roth contribution from your checking account. Hence, some or all of your RMD may make it to your Roth IRA as long as you qualify to make a contribution under the limits. But a direct rollover is not permitted.”

Assistant editor Kim McSheridan assisted with this report.

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Question

I saw that you have said that one cannot take an RMD and roll it over into a Roth IRA. I'm a little unclear about what you've said. Can one, if one pays the taxes on the RMD then roll it over into the Roth regardless of earned income? If it cannot be rolled over, can a portion of it be contributed to the Roth, assuming that one meets the earned income requirements, and it is at or below the contribution maximum?

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