Should I Do a Roth Conversion Before Required Minimum Distributions Begin?

You spent decades putting money into your IRA and 401(k).

You saved.

You invested.

You let the money grow tax-deferred.

Then retirement gets closer and you discover something that may not have received much attention while you were accumulating the money:

At some point, the government generally requires you to start taking money back out.

Those withdrawals are called required minimum distributions, or RMDs.

And if you have $500,000, $1 million, $2 million or more sitting in tax-deferred retirement accounts, that can lead to an important question:

“Should I convert some of my IRA to a Roth before my RMDs begin?”

Maybe.

But don’t convert simply because you’re afraid of RMDs.

First, find out what your RMD problem may actually look like.

Quick Answer: Should You Do a Roth Conversion Before RMDs?

A Roth conversion before required minimum distributions begin can be worth analyzing if you have substantial tax-deferred retirement assets and want to potentially reduce future traditional IRA balances, future RMDs, or future taxable retirement distributions.

But there’s a tradeoff.

A Roth conversion generally creates taxable income today to the extent you’re converting previously untaxed retirement money.

So you’re comparing two paths:

Pay taxes on converted money now under today’s circumstances.

Or:

Leave the money tax-deferred and deal with future withdrawals and RMDs later.

The right answer isn’t hiding in a rule of thumb.

It’s in the numbers.

What Is a Required Minimum Distribution?

A required minimum distribution is an amount the federal tax rules generally require you to withdraw each year from certain retirement accounts after reaching your applicable RMD starting age.

Traditional IRAs are generally subject to RMD rules.

Traditional 401(k)s and certain other employer retirement accounts are also generally subject to RMD rules.

Roth IRAs are different.

Under current federal rules, the original owner of a Roth IRA doesn’t have to take lifetime RMDs from that Roth IRA.

That’s one reason Roth conversions often enter the conversation when somebody has accumulated a substantial amount of pre-tax retirement money.

When Do RMDs Begin?

Your required beginning age depends on your birth year under current federal law.

For many people currently approaching retirement, RMDs won’t begin until age 75.

That’s especially relevant if you’re currently 55 to 65.

You may have years between retirement and your first RMD.

And those years can matter.

A lot.

Why the Years Before RMDs Can Be So Important

Imagine you’re 62.

You’ve just retired.

Your paycheck is gone.

You have $1 million in a traditional IRA.

You don’t need to withdraw much from it yet.

Maybe you’re delaying Social Security.

And under current rules, your RMDs are still years away.

Your taxable-income picture during those years could be very different from what it was while you were earning a full salary.

That’s the window I want to examine.

Not because it automatically means you should convert.

Because there may be an opportunity to make decisions about your tax-deferred money before those decisions start interacting with required distributions.

What Happens If You Do Nothing Before RMDs?

Doing nothing is a perfectly legitimate scenario to model.

Suppose you’re 60 with $1 million in a traditional IRA.

You don’t convert anything.

The account remains invested.

You take whatever withdrawals you need along the way.

Eventually, RMDs begin.

What does the account look like then?

What could the required distributions look like?

How much other taxable income might you have?

What happens when Social Security is added?

What happens if you’re married and later one spouse dies?

Those are the numbers I want to see.

Before we decide that RMDs are a problem, let’s find out whether they’re actually a problem for you.

How Are RMDs Calculated?

For a traditional IRA, the annual RMD is generally calculated using the prior December 31 account balance and an applicable IRS life-expectancy factor.

That means the size of your future traditional IRA matters.

If your IRA is worth more when RMDs begin, the required distribution may also be larger than it would have been with a smaller account balance, all else being equal.

This creates an interesting contradiction.

You want your retirement account to grow.

Of course you do.

But if it’s a tax-deferred account, growth can also mean a larger pool of money that may eventually be subject to taxable distributions.

Both things can be true at the same time.

Can a Roth Conversion Reduce Future RMDs?

Potentially, yes.

Here’s the basic idea.

Money converted from a traditional IRA into a Roth IRA is no longer sitting in the traditional IRA.

That reduces the traditional IRA balance compared with a scenario where the converted money remained there, assuming everything else were equal.

And because Roth IRA owners currently don’t have lifetime RMDs from their own Roth IRAs, the converted amount isn’t later included in the owner’s traditional IRA RMD calculation.

But here’s the part that gets skipped in simplistic Roth conversion discussions:

You generally paid tax to move that money.

Reducing an RMD isn’t automatically worth any price.

We need to compare the cost with the projected benefit.

Here’s a Simple Example

Imagine two 60-year-olds.

Both have $1 million in traditional IRAs.

Both plan to retire soon.

Person A: No Roth Conversion

Person A leaves the entire traditional IRA alone.

The account continues under whatever investment and withdrawal assumptions are being modeled.

Eventually, RMDs begin based on the applicable rules at that time.

Person B: Partial Roth Conversions

Person B models a series of partial Roth conversions during the years before RMDs begin.

That creates taxable income during the conversion years.

But it also means less money remains in the traditional IRA than would have remained there without those conversions, assuming everything else were equal.

Which person ends up better off?

We don’t know yet.

That’s exactly the point.

You have to model both paths.

The Goal Isn’t to Eliminate Your RMD

This is important.

Sometimes people become so focused on RMDs that eliminating them starts to sound like the entire retirement goal.

It’s not.

I’d happily take a larger RMD if the strategy producing it also left you with a substantially better overall retirement outcome.

The objective isn’t:

“How do I get the smallest possible RMD?”

The better question is:

“How do I create the retirement outcome I want after considering taxes, income, RMDs, risk, liquidity, legacy and the cost of making changes?”

Can You Convert an RMD to a Roth IRA?

No.

This rule matters.

Once you’re required to take an RMD for the year, that required distribution itself isn’t eligible to be rolled over or converted to a Roth IRA.

Generally, the RMD has to come out first.

After satisfying the required distribution, additional eligible retirement money may potentially be converted.

So reaching RMD age doesn’t necessarily shut the door on future Roth conversions.

But it does change the mechanics.

Why Not Just Wait Until RMDs Start?

You can.

Waiting is one of the scenarios worth testing.

But imagine you’re retired for several years before RMDs begin.

Your employment income is gone.

Maybe your other taxable income is temporarily lower.

Then RMDs begin later.

If you never examined the years in between, you may have ignored a potentially useful planning period.

That doesn’t mean the answer was definitely to convert.

It means you should have run the numbers while you still had the choice.

What If You’re Still Working?

Let’s say you’re 62 and earning $200,000.

Your RMDs are years away.

Should you immediately start converting large portions of your IRA?

Not necessarily.

Your employment income already occupies part of your taxable-income picture.

Adding a substantial taxable Roth conversion could push more income into higher marginal tax brackets.

Maybe smaller conversions deserve consideration.

Maybe the years immediately after retirement look more attractive.

Maybe the numbers favor doing nothing.

That’s why “convert before RMDs” is a starting point for analysis, not a complete strategy.

What About Social Security?

Social Security can change the picture too.

Depending on your overall income, up to 85% of Social Security benefits can be included in taxable income under current federal rules.

A Roth conversion can increase taxable income.

That means conversion timing and Social Security timing can interact.

If you’re retired but haven’t claimed Social Security yet, those years may look different from the years after Social Security begins.

Again, don’t make these decisions in separate boxes.

What About Medicare IRMAA?

Here’s another piece that can’t be ignored.

Higher-income Medicare beneficiaries can pay additional Part B and Part D premiums through IRMAA.

A taxable Roth conversion can increase modified adjusted gross income.

Medicare generally uses income information from two years earlier when determining IRMAA.

So you could complete a conversion and feel the Medicare effect later.

Does that mean you shouldn’t convert?

No.

It means the potential Medicare cost belongs in the calculation.

The Surviving-Spouse Problem Deserves Attention

Here’s something couples often don’t think about enough.

You’re married.

You’re planning retirement together.

Then one spouse dies.

The surviving spouse may eventually move from married-filing-jointly tax brackets to single-filer brackets while still owning a substantial amount of retirement money.

That can change the tax picture dramatically.

This is why I don’t want to model only the next five years.

We also need to ask:

“What could this look like for the surviving spouse?”

“I Don’t Want My Kids to Have to Deal With This”

For some people, RMDs aren’t even the deepest concern.

The real thought is:

“We’re probably not going to spend all of this.”

Then:

“What happens when our kids inherit it?”

Many non-spouse beneficiaries are currently subject to a 10-year rule for inherited retirement accounts.

Traditional IRA distributions can create taxable income for beneficiaries.

Inherited Roth IRAs are also subject to beneficiary distribution rules, although qualified Roth distributions are generally tax-free.

If you already suspect your IRA will become an inheritance, that should be part of your Roth conversion analysis today.

The Emotional Reason People Wait Too Long

There’s a reason this decision gets pushed off.

It’s not always laziness.

It’s fear.

You spent 30 years building this money.

Now somebody is talking about intentionally creating a tax bill and moving hundreds of thousands of dollars.

Your brain says:

“What if I mess this up and regret it?”

Then another thought shows up:

“We should be able to handle this ourselves.”

And maybe:

“I don’t want to ask my kids for help later because we made the wrong decision now.”

Those aren’t silly fears.

They explain why people freeze.

But avoiding the decision doesn’t remove the decision.

Your current strategy keeps moving forward whether you examine it or not.

What If Future Tax Rates Are Different?

This is where people sometimes want somebody to predict the future.

“What will tax rates be when I’m 75?”

Nobody can promise you that answer.

Tax laws can change.

That’s why good modeling shouldn’t pretend the future is certain.

Instead, you can examine assumptions and see how sensitive the outcome is to different tax environments.

The more your strategy depends on one exact future tax rate being correct, the more carefully you should examine that assumption.

The Retirement Math Method™

This is why I use the Retirement Math Method™.

I don’t start by saying:

“RMDs are bad, so convert your IRA.”

That’s not enough.

We start with your existing retirement strategy.

What happens if you don’t change anything?

Then we can model alternatives.

What happens with partial conversions?

What happens with different conversion amounts?

What happens with different timing?

What happens before and after retirement?

What happens when Social Security begins?

What happens when RMDs begin?

What happens to the surviving spouse?

What happens to the children?

Then you can compare the projected results.

I don’t try to sell you on the strategy. I make the strategy prove itself with the math.

Questions to Ask Before RMDs Begin

What is my current traditional IRA and 401(k) balance?
How much of that money is pre-tax?
At what age will my RMDs begin under current law?
What could my account balance look like by then?
What might my first RMD look like?
What could later RMDs look like?
How will RMDs interact with Social Security and other income?
What happens if I don’t convert anything?
What happens if I convert part of the account?
Should conversions happen while I’m working or after retirement?
Could conversion income affect Medicare IRMAA?
Where would the money come from to pay conversion taxes?
What could the tax picture look like for my surviving spouse?
What happens if my children inherit the remaining account?

Frequently Asked Questions About Roth Conversions Before RMDs

Should I do a Roth conversion before RMDs begin?

It can be worth analyzing, particularly if you have substantial tax-deferred retirement assets. Converting money before RMDs begin may reduce the amount remaining in traditional IRAs and therefore potentially reduce future RMDs compared with leaving the converted money in the traditional IRA. However, the conversion generally creates taxable income today, so both sides need to be compared.

Can a Roth conversion eliminate future RMDs?

Roth IRA owners currently aren’t required to take lifetime RMDs from their own Roth IRAs. Money remaining in traditional IRAs is generally subject to RMD rules at the applicable age. Whether it makes sense to convert enough to substantially reduce or eliminate a traditional IRA balance is a separate financial and tax-planning decision.

Can I convert my RMD into a Roth IRA?

No. An RMD itself isn’t eligible for rollover or Roth conversion. Once RMD rules apply, the required distribution generally must be satisfied before additional eligible retirement money can be converted.

Can I still do Roth conversions after RMDs begin?

Potentially, yes. Reaching RMD age doesn’t automatically prevent additional eligible amounts from being converted. However, the RMD itself must generally be taken first and can’t be converted.

At what age do RMDs start?

Under current federal law, the applicable RMD starting age depends on birth year. For people born in 1960 or later, the applicable age is generally 75. Because retirement laws can change, verify the rules that apply to you when planning future distributions.

Do Roth IRAs have RMDs?

The original owner of a Roth IRA currently isn’t required to take lifetime RMDs. Beneficiaries of Roth IRAs are subject to inherited-account distribution rules.

Does converting before RMDs save taxes?

Not automatically. A Roth conversion generally creates taxable income in the year of conversion. Whether the strategy produces a better long-term after-tax outcome depends on conversion timing, tax rates, account growth, withdrawals, longevity, other income and other assumptions.

How many years before RMDs should I start Roth conversions?

There isn’t one correct number of years for everyone. The potential conversion window depends on your age, retirement date, income, Social Security timing, Medicare, IRA balance, tax situation and goals. That’s why multiple conversion schedules can be modeled rather than choosing an arbitrary starting age.

The Question Isn’t “How Do I Avoid RMDs?”

If you’re approaching retirement with $500,000 or more in tax-deferred accounts, don’t make avoiding RMDs the goal.

Make the goal a better retirement outcome.

Maybe reducing future RMDs helps accomplish that.

Maybe Roth conversions help.

Maybe the tax cost means a smaller conversion works better.

Maybe your existing strategy wins.

But don’t guess.

You spent decades accumulating the money. Before you spend the next few decades living on it, run the math.

Want to See What Your RMDs and Roth Conversion Options Could Look Like?

If you’re between roughly 55 and 65 and have $500,000 or more accumulated in IRAs, 401(k)s, or other tax-deferred retirement accounts, this is exactly the kind of situation I help people analyze.

You don’t have to decide beforehand that you’re doing a Roth conversion.

We’ll start with your current path.

Then we’ll look at potential alternatives and compare the projected outcomes.

You’ll have an opportunity to review the numbers, see the assumptions, and ask questions before deciding what makes sense for you.

No pressure to make a decision on the spot. We run the math first.

Schedule Your No-Pressure Retirement Strategy Appointment

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If you’re trying to make these decisions before RMDs begin, read these three articles next:

Important Disclosure

This article is for educational purposes only and isn’t intended as individualized tax, legal, investment, or accounting advice. Roth conversions can create significant tax consequences and may affect Medicare premiums, Social Security taxation, and other parts of your financial situation. Tax laws and retirement rules can change. Before implementing a conversion, consider working with qualified financial and tax professionals who can evaluate your individual circumstances.