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How Do I Handle My RMD With Multiple Retirement Accounts BEFORE Converting to a Roth IRA?

April 01, 2016

In today's blog we answer questions on how to take a required minimum distribution (RMD) prior to taking a Roth conversion and provide guidance on whether a spouse with no taxable compensation can make an IRA contribution.

Question 1.

If one has several IRA accounts, each with a different trustee, required minimum distributions (RMDs) must be calculated separately for each (and then combined if one wishes). When it comes to making a Roth conversion, one is required to wait until the full RMD has been taken before converting a distribution to a Roth.  Question: Is each IRA account looked at separately for this purpose? Or are all IRAs combined?

May I take the full, individual RMD from just one account and then proceed with a Roth conversion from that same account, while the other IRAs have not yet met their RMD requirements?

The Answer Is...

Good news! If you have multiple traditional IRAs, and you are planning to convert one to a Roth IRA, you must take the RMD for just that traditional IRA prior to the conversion. Here's more analysis on multiple retirement accounts and RMD procedure. You are not required to take the RMDs from any of your other traditional IRAs prior to the conversion.

Question 2.

Can you please tell me if my wife can contribute to a spousal traditional IRA and spousal Roth IRA if she doesn't work? If so, will she be able to take the $5,500 deduction from the traditional IRA if she does both?

The Answer Is...

If you have enough taxable compensation for the year, your wife may be able to make a traditional IRA contribution, even though she does not work and has no taxable compensation. How can this be done? By using the “Kay Bailey Hutchison Spousal IRA” rules. With these rules, your wife can make a $5,500 spousal contribution to her traditional or Roth IRA using your taxable compensation.

The standard IRA contribution rules apply. That means age limits for traditional IRA contributions and income limits for Roth IRA contributions. It sounds like your wife is not reaching age 70 ½ in 2016, so she would be eligible to make a contribution to a traditional IRA. Her ability to contribute to a Roth IRA will phase out when Modified Adjusted Gross Income (MAGI) is between $184,000- $194,000 for 2016. If she is age 50 or older during the year, she is eligible to also make the additional $1,000 catch-up contribution for a total contribution of $6,500.

If she contributes to a traditional IRA, she will be able to fully deduct this contribution if  she is not an active participant in a retirement plan for the year. If she is an active participant, her ability to deduct her contribution will phase out if her MAGI is between $184,000 - $194,000 for 2016.

What you cannot do is contribute $5,500 to an IRA and $5,500 to a Roth IRA. You are limited to a total contribution of $5,500 which can be split between the two types of accounts.

Be sure to check with your financial advisor to review the details of your situation and help you decide if a spousal IRA contribution is the right move for your wife. 

By Sarah Brenner and Beverly DeVeny

Copyright © 2016 Ed Slott and Company, LLC Reprinted from The Slott Report, 04/01/2016, with permission.

Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.