If you don’t need your required minimum distributions (RMDs) from your traditional individual retirement account (IRA) for living expenses, can they be reinvested in a Roth IRA? Fortunately, they can—assuming you're eligible for a Roth based on your income.💜

This is because the money to fund your IRA can come from any pool of cash that you have available; however, you still ne🐈ed to pay attention to the c📖ontribution limits and earned income requirements.

How Required Minimum Distributions (RMDs) Work

Traditional 澳洲幸运5官方开奖结果体彩网:i🀅ndividual retirement account (IRA) contributions are made with 澳洲幸运5官方开奖结果体彩网:pretax dollars; in return, taxpayers can claim a deduction for the tax year the IRA contribution was made. On the other end, IRA distributions are taxable as income and may be subject to an IRS penalty if 澳洲幸运5官方开奖结果体彩网:withdrawn early.

Roth IRA contributions, on the other hand, are made with after-tax do♛llars. So, while you don’t get an up-front tax break, you c🐟an withdraw the money tax-free in retirement.

Owners of traditional IRAs–as well as of Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees (SIMPLE) IRAs– must begin taking annual 澳洲幸运5官方开奖结果体彩网:required minim🌜um distributions (RMDꦺs) at the age of 72. But there is an exception. Your RMDs must start at age 73 if you reach age 72 after Dec. 31, 2022.

RMD amounts are calculated based on the total amount saved in all of your traditional IRAs; however, there are no RMD mandates for Roth IRAs during the owner’s lifetime, making them ideal wealth-transfer vehicles. Any money in the IRA that you don't need can stay in the account and be passed on to your heirs.

Investing an RMD Into a Roth IRA

For the 2024 tax year, the 澳洲幸运5官方开奖结果体彩网:annual contribution limit to an IRA is $8,000 if you’re 50 or older. That limit is the total for all your IRAs—traditional and Roth. (The limits are $1,000 less for anyone under age 50.) These limits remain the same for 2025.

The Internal Revenue Service (IRS) requires that you have enough 澳洲幸运5官方开奖结果体彩网:earned income to cover your Roth IRA contribution for the year, but the actual source of your contribution need not be directly from a paycheck.

If your RMD was $8,000 or less, you could deposit all the money into your 𒉰Roth IRA. However, if you co🔜ntributed $4,000 to another IRA in the same year, you could place just $4,000 of your RMD into a Roth IRA.

Roth IRA contribution rules are also based on your income and tax-filing status. If your modified adjusted gross income (MAGI) is in the Roth IRA phaseout range, you can only make a reduced contribution. You can’t contribute at all if your MAGI exceeds the upper limit for your 澳洲幸运5官方开奖结果体彩网:filing status.

Here’s a rundown:

Avoiding RMDs

There is the option to convert your traditional IRA into a Roth IRA—also known as a 澳洲幸运5官方开奖结果体彩网:Roth IRA conversion. Since Roth IRAs don’t have RMDs, you will no longer be required to take a🌄nnual withdrawals once the funds are in the Roth.

However, the Roth IRA conversion is a taxable event—and the tax bill can be big. Since you received a tax deduction on the contributions into your traditional IRA, you need to pay those deferred taxes on the converted funds.

It’s a good idea to check with a tax professional to determine whether a conversion would make financial sense for you, as there are other factors to consider besides the RMD issue. For example, converting money from a traditional IRA to a Roth could also push you into a higher 澳洲幸运5官方开奖结果体彩网:tax bracket, meaning your 澳洲幸运5官方开奖结果体彩网:marginal tax rate could be higher for that year.

If you decide to convert to a Roth IRA, remember to take an RMD from the traditional IRA one last time for the year of the conversion. That’s necessary because the traditional IRA still existed during that year.

Tax Consequences for Converting RMDs

An RMD can be used i🦋n many ways, such as for discretionary spending or to supplement retirement in♔come.

RMDs can be reinvested, except in most retirement accounts, such ꧙as traditional and Roth IRAs. The type of investment vehicle determines how funds are taxed.

For example, profits from the sale of stock are taxed as capital gains. Owners of mutual funds typically pay taxes on earnings and dividends while holding the funds. Then, when mutual fund shares are sold, the earnings are taxed as capital gains.

Another popular option is to invest the RMD into a 澳洲幸运5官方开奖结果体彩网:529 savings plan, which provides money for education costs, such as apprenticeships, education expenses for students in primary, secondary, and postsecondary institutions, and student loan repayments. In a 529 plan, the funds accumulate on a tax-deferred basis, and qualifying events allow funds to be withdrawn tax-free.

Qualified Charitable Distribution

IRA holders can satisfy RMD mandates by taking qualified charitable distributions (QCDs), which are nontaxable withdrawals from qualified plans made directly to charities. In 2024, QCDs up to $105,000 count toward the RMD amount.

To qualify as a QCD, the account holder must be at least 70½ years old. The distribution must be made from the eligible account by December 31 (no later than April 15 of the year following the first RMD year) and paid directly to the eligible charity.

Be careful about your choice because not all charities qualify. For instance, the charity cannot be a private foundation, a donor-led charity, or a charity where the donated funds directly support the donor. The charity also cannot be a supporting organization—a charity that supports other charities.

QCDs that exceed the RMD will not count toward future RMDs. Although reportable, the distribution is not subject to taxation and is not deductible. If a withdrawal is taken and the funds are later contributed to a charity, then the distribution is taxable as income. The funds must be withdrawn as a QCD.

The Bottom Line

澳洲幸运5官方开奖结果体彩网:Roth IRAs have no RMDs during the account owner’s lifetime. So, if you don’t need the money, you can leave your Roth aಞlone to continue growing tax-free for your heirs. Traditional IRAs don’t have the same flexibility, and you must start taking those RMDs at age 73, whether you want the money or not.

Still, as long as you have enough earned income for the year to cover the contribution and you don’t exceed the income limits, you can deposit your traditional IR🌟A’s RMDs into your Roth. This can be a smart way to boost your Roth IRA while following the RMD rules for your traditional IRA.