I Do Not Need My IRA RMD. Can I Put It in a Roth IRA? (2024)

If you don’t need your required minimum distributions (RMDs) from your traditional IRA for living expenses, can it be reinvested in a Roth IRA? Yes—assuming that you are eligible for a Roth based on your income.

This is because the money to fund your individual retirement account (IRA) can come from any pool of cash that you have available; however, you still need to pay attention to the contribution limits and earned income requirements.

Key Takeaways

For 2022, you can contribute a combined total of $6,000 to your IRAs ($7,000 if you’re age 50 or older). In 2023, those amounts rise to $6,500 and $7,500.
Roth IRA holders are not required to take required minimum distributions (RMDs).
Internal Revenue Service (IRS) income limits determine one’s eligibility for a Roth IRA.
RMDs must be withdrawn a final time before converting a traditional IRA to a Roth IRA.
RMD funds can be reinvested into different types of accounts, such as mutual funds, stocks, and 529 education savings plans.

How Required Minimum Distributions (RMDs) Work

Traditional IRA contributions are made with pretax dollars; in return, taxpayers are allowed to claim a deduction for the tax year in which the IRA contribution was made. On the other end, IRA distributions are taxable as income and may be subject to an IRS penalty if withdrawn early.

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

Traditional IRA holders must begin taking annual RMDs at the age of 73 if they were born between 1951 and 1959, or 75 if they were born in 1960 or after. This is an increase from the previous age of 72.

These 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 2022 tax year, the annual contribution limit to an IRA is $7,000 if you’re 50 or older. In 2023, that limit goes up to $7,500. That limit is the total for all of your IRAs—traditional and Roth. (The limits are $1,000 less for anyone under age 50.)

The Internal Revenue Service (IRS) requires that you have enough 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 less than $7,000, you could deposit all of the money into your Roth IRA; however, if you contributed $4,000 to another IRA in the same year, you could place just $3,000 of your RMD into a Roth IRA.

The IRS prohibits account holders from converting RMDs directly to a Roth IRA.

There are also Roth IRA contribution rules based on your income and tax-filing status. If your modified adjusted gross income (MAGI) is in the Roth IRA phase out range, then you can make a reduced contribution. You can’t contribute at all if your MAGI exceeds the upper limit for your filing status.

Here’s a rundown for the 2022 and 2023 tax years:

Roth IRA Income Limits
Filing Status	2022 MAGI	2022 Contribution Limit	2023 MAGI	2023 Contribution Limit
Married filing jointly or qualifying widow(er)	Less than $204,000	$6,000 ($7,000 if age 50 or older)	Less than $218,000	$6,500 ($7,500 if age 50 or older)
	$204,000 to $213,999	A reduced amount	$218,000 to $227,999	A reduced amount
	$214,000 and above	Zero	$228,000 and above	Zero
Single, head of household, or married filing separately (and you didn’t live with your spouse at any time during the year)	Less than $129,000	$6,000 ($7,000 if age 50 or older)	Less than $138,000	$6,500 ($7,500 if age 50 or older)
	$129,000 to $143,999	A reduced amount	$138,000 to $152,999	A reduced amount
	$144,000 and above	Zero	$153,000 and above	Zero
Married filing separately (and you lived with your spouse at any time during the year)	Less than $10,000	A reduced amount	Less than $10,000	A reduced amount
	$10,000 and above	Zero	$10,000 and above	Zero

Avoiding RMDs

There is the option to convert your traditional IRA into a Roth IRA—a move called a Roth IRA conversion. Since Roth IRAs don’t have RMDs, you will no longer be required to take annual withdrawals once the funds are in the Roth.

Remember, Roths don’t have an up-front tax deduction for the initial contributions, but qualified withdrawals in retirement are tax-free, and there are no RMDs during the owner’s lifetime.

However, the Roth IRA conversion is a taxable event—and the tax bill could be substantial. 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 tax bracket, meaning that your 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 in many ways, such as for discretionary spending or to supplement retirement income.

RMDs can be reinvested, except in most retirement accounts like traditional and Roth IRAs. How funds are taxed depends on the type of investment vehicle.

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 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. QCDs up to $100,000 count toward the RMD amount.

To qualify as a QCD, the account holder must be at least 70½ years old, and the distribution must be made from the eligible account by December 31 (no later than April 1 of the year following the first RMD year). Also, the distribution must be 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.

Are Required Minimum Distributions (RMDs) Considered Earned Income?

No, a RMD is not considered earned income. However, the IRS treats RMDs from traditional IRAs as ordinary and therefore, taxable income. Although Roth IRA owners are not required to take RMDs during their lifetime, upon their death, designated beneficiaries are. In contrast to traditional IRAs, Roth RMDs that represent cost basis are not taxable as income.

How Do You Convert a Roth and Manage an RMD Withdrawal in the Same Tax Year?

For account holders who must take an RMD, the withdrawal must occur before the Roth IRA conversion.

Are There Age Limits on When You Can Convert a Traditional IRA Into a Roth IRA?

There are no age limits on when a traditional IRA can be converted into a Roth IRA.

The Bottom Line

Roth IRAs have no RMDs during the account owner’s lifetime. So, if you don’t need the money, you can leave your Roth alone 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 IRA’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.