Roth Conversion FAQs - Age Limits, Deadlines, Income Limits, RMDs, and More

Roth conversions can be a great way to limit your long term tax liability. However the analysis is often complex. We have numerous in-depth videos and posts that get into the details that you should look at if you are interested in some of the finer details of creating a Roth conversion plan. We’ll link to some of these other resources below.
But we also receive many basic questions about Roth conversions that can get answered quickly and don’t depend on your specific financial situation:
1) Roth Conversion Age limits
One of the most common basic questions on Roth conversions we get is “Are there age limits for Roth conversions”. Thankfully, there are not. Whether you are 18 or 100 you are eligible to do a Roth conversion. There is one thing to note, if you are under age 59.5 and you withhold taxes from the conversion to pay the tax bill, you may be assessed a penalty on just the withheld tax amount. You are not penalized on the full Roth conversion amount though, only if you also use the IRA to pay the taxes.
2) Income Limits for Roth conversions
There’s also a common question about income limits and Roth conversion eligibility. You are able to do a Roth conversion regardless of your income. While there are income limitations for making regular Roth IRA contributions, those do not apply to Roth conversions.
3) Roth Conversion Deadline
People also ask about the deadline for doing Roth conversions. Roth conversions must be completed by December 31st in order for the conversion to count for that calendar year. You can not do a conversion in February and have it apply to your prior year taxes. This is also different from the deadlines for regular IRA contributions, where you are allowed to make contributions as late as April and still have those contributions count for the prior tax year.
4) Will a Roth Conversion satisfy an RMD?
Finally, a lot of retirees want to know if a Roth conversion can satisfy and RMD, or required distribution. Unfortunately no, RMDs are not satisfied from Roth conversions.
However, know that withheld taxes do count towards your RMD. So, if you have a $20,000 RMD for the year, you can do a $20,000 IRA distribution with 100% withholding rate for taxes, and then do a Roth conversion that creates a $20,000 tax bill and your RMD would be satisfied. This can be one option for retirees that don’t need their RMDs for everyday living expenses.
With these basic questions out of the way, you may be asking if Roth conversions are right for you. This is one of the most important parts of a financial plan, and one we help clients with every day. If you are interested, please reach out to Arnold and Mote.
For detailed articles on Roth Conversions, see our other videos or our blog post here: arnoldmoteweal...
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