By Andy Ives, CFP®, AIF®
IRA Analyst
QUESTION:
I turn age 73 on December 1, 2026. I would like to do a Roth IRA conversion on January 1, 2026, prior to turning 73 years old. Does my first required minimum distribution (RMD) begin January 1, 2026, the year that I turn age 73? Am I correct that my RMD must be satisfied before a conversion?
Best regards,
Terry
ANSWER:
Terry,
You are correct that you must satisfy your full IRA RMD from all of your traditional IRAs (assuming you have more than one) before doing any Roth IRA conversions in 2026. The first withdrawals taken from an IRA are deemed to count toward the RMD. Since you will turn age 73 in calendar year 2026, and since RMDs cannot be converted, the full 2026 RMD amount must be satisfied before you can do a conversion later that same year.
QUESTION:
I have a client who is RMD age and does not have an existing Roth IRA. If he converts his traditional IRA to a Roth IRA and dies before his 5-year clock holding period is satisfied, can the beneficiaries satisfy the 5-year clock? Are the earnings taxable?
-Elena
ANSWER:
Elena,
Once your client satisfies his RMD for the year, he can then convert all or a portion of his IRA to a Roth IRA. If he has never had a Roth IRA before, the conversion starts his 5-year clock for tax-free earnings. If he were to die prior to satisfying this clock, his beneficiaries would have to wait out your client’s full 5 years before the earnings in the inherited Roth IRA would be tax-free. This is true even if a beneficiary held his own (not inherited) Roth IRA for more than 5 years.
Fortunately, based on strict Roth IRA distribution ordering rules, the beneficiaries can draw down all the converted dollars prior to even reaching the earnings. If they needed a little cash, that could buy them some time to wait out the clock. If, however, the earnings were withdrawn by a beneficiary prior to the 5 years, those dollars would be taxable, but there would be no penalty.
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