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RMD

Why You Can’t Convert RMDs to Roth IRAs — And What to Do

May 2, 2025 No comments yet

As featured in https://www.gobankingrates.com/retirement/iras/what-you-cannot-do-with-your-required-minimum-distributions-in-retirement/

For many people approaching retirement, Roth conversions feel like a no-brainer. They’ve heard the concept from friends, online forums, or financial podcasts: convert pre-tax retirement dollars to a Roth IRA, pay taxes now, and enjoy tax-free growth forever. Sounds great, right?

But here’s where things get tricky. Once you hit the age for Required Minimum Distributions (currently 73), the IRS changes the rules. Those RMDs are no longer eligible to be converted to a Roth IRA. If you’re not prepared for that limitation, you could be facing an unnecessary—and avoidable—tax burden.

Let’s walk through why RMDs can’t be converted, what people often misunderstand, and what you can do instead to stay ahead of the tax curve in retirement.


Why RMDs Can’t Be Converted to Roth IRAs

The IRS requires individuals to begin taking RMDs from their pre-tax retirement accounts—like Traditional IRAs, SEP IRAs, or 401(k)s—once they reach a certain age (currently 73, increasing to 75 for some). These distributions are mandatory and taxable as ordinary income.

Here’s the key: once the RMD is triggered, those dollars must be withdrawn. You cannot simply redirect the distribution into a Roth IRA. It’s no longer considered “eligible” for conversion because it’s already been classified as a distribution. In other words, it’s left the tax-deferred world and become taxable income.

Any Roth conversion you want to do in that year must happen after you’ve taken your full RMD amount. And that new conversion amount must be in addition to your RMD—not instead of it.

This is often misunderstood, especially by people who are trying to reduce their tax bill in retirement. The problem is, once you’re taking RMDs, your room to maneuver narrows significantly.


What People Often Get Wrong

In working with clients, one of the most common misconceptions I encounter is this: they assume Roth conversions are always on the table, regardless of age or withdrawal status. They’ve heard the benefits—tax-free growth, no RMDs from the Roth, better inheritance treatment—and assume they can convert whatever amount they want.

But the IRS doesn’t allow RMD amounts themselves to be converted. The logic is straightforward: you didn’t pay taxes on that money for decades. Now that it’s time to distribute, the IRS wants its cut.

Another mistake people make is not planning for how large their RMDs could become. If you’ve saved diligently or experienced strong portfolio growth, you might have a much larger tax problem on your hands than you anticipated. RMDs can easily push your income into higher tax brackets, increase the taxability of Social Security benefits, and trigger Medicare premium surcharges (IRMAA).

This “tax torpedo” effect often blindsides retirees who didn’t plan ahead. That’s why thinking about this before RMD age is critical.


What You Can Do Instead: The Power of Roth Conversions Before RMD Age

The best opportunity to reduce RMDs and long-term taxes is during what we call the “gap years”—the period between retirement and the start of RMDs. During these years, your income may be unusually low, which gives you the chance to convert IRA dollars to Roth IRA at relatively low tax rates.

Let’s say you retire at 62, delay Social Security until 70, and don’t have a pension. You might have very little income on your tax return. That’s the window.

Roth conversions during this phase allow you to pre-pay taxes on IRA money while filling up lower tax brackets—say the 12% or 22% brackets—instead of being forced into the 32% bracket later when RMDs stack on top of Social Security and investment income.

This strategy isn’t just good for your lifetime tax bill—it’s good for your heirs too. Roth IRAs don’t have RMDs for the original account owner, and when your children inherit the Roth, distributions remain tax-free (assuming the account is at least five years old).


Don’t Forget the Mega Backdoor Roth

For high-income earners still working, the “mega backdoor Roth” is a lesser-known strategy that leverages after-tax contributions in a 401(k) plan to build up Roth dollars quickly. Some employer plans allow for after-tax contributions beyond the $23,000 salary deferral limit (2025), and then allow in-plan conversions of that money into the Roth side.

This isn’t possible in every plan, but where it is available, it’s an incredibly powerful way to shift more money into tax-free territory while you’re still earning.


What About Once You’re Already Taking RMDs?

If you’re already in the RMD phase of life, you still have tools—just different ones.

One of the most effective options is the Qualified Charitable Distribution, or QCD. This allows you to send up to $100,000 per year directly from your IRA to a qualified 501(c)(3) organization. That amount satisfies your RMD and does not count toward your taxable income.

This is especially powerful for people who are already charitably inclined but don’t itemize deductions. Giving cash from your bank account might not offer any tax benefit if you’re taking the standard deduction, but giving from your IRA through a QCD gives you a 100% above-the-line exclusion.

It’s clean. It’s efficient. And it can dramatically improve your tax situation.

Another way to use your RMD strategically: even if you don’t need the income, you can invest it in a taxable brokerage account. It won’t grow tax-deferred like a retirement account, but with careful selection—like focusing on tax-efficient ETFs or municipal bonds—you can still keep taxes low and retain flexibility.


Planning for RMDs: A Timeline

It helps to think about your tax planning in stages:

In your early career, prioritize Roth contributions if your tax bracket is low. If you’re eligible, use Roth IRAs or Roth 401(k)s and consider funding Health Savings Accounts (HSAs) for long-term tax-free medical spending.

During peak earning years, you may switch to pre-tax contributions for the deduction. But if your employer allows after-tax contributions and in-plan Roth conversions, the mega backdoor Roth is worth exploring.

Once you retire—before age 73—you may enter a “low tax” window. Use it. Convert IRA dollars to Roth during this time to minimize your RMDs and build a tax-free bucket for the future.

After RMDs begin, shift to strategies like QCDs, tax-efficient investing in taxable accounts, and gifting appreciated securities from your brokerage account to charity.


Final Thoughts

The key takeaway here is simple: RMDs are inevitable, but your tax pain doesn’t have to be. With proactive planning—especially in the years leading up to your first RMD—you can reduce your lifetime tax bill, preserve more of your wealth, and give yourself and your heirs a better outcome.

The mistake is waiting too long. Too many retirees find themselves scrambling once their RMD hits, wondering why their tax bill exploded and why no one warned them earlier.

If you’re still years away from RMD age, take this as your opportunity. If you’re already there, don’t panic—there are still levers to pull. But either way, the sooner you have a coordinated tax strategy in place, the more freedom you’ll have when it matters most.


Need Help Creating a Tax-Efficient Retirement Plan?

If you’re looking to take advantage of the planning window before RMDs—or want to use your distributions more strategically—reach out. We specialize in helping retirees minimize taxes, maximize flexibility, and align their income plan with what matters most.

 

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