Ira to Roth conversation for 2020

Home Fairmark Forum Retirement Savings and Benefits Ira to Roth conversation for 2020

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  • #6274
    pnaik1
    Participant

    I convert TIra to Roth at end of the year. As MRD is not required for this year per mandate. Will I be penalized, if I convert some amount to Roth before taking MRD?
    Thanks in advance.

    #6275
    dienerte
    Participant

    my understanding is that since no RMD is required in 2020, there is no way that you can be penalized for something that does not exist. Therefore your first and only action will be a conversion.

    Personally I wanted to take a QCD this year as usual because of the pandemic situation and charities needing funding. Normally I take my QCD first, then do the remaining portion of my RMD, and finally do a Roth conversion. I just completed my QCD (which will not show up on my 1040 as taxable income) and the next thing I will do is do a Roth conversion of the remaining amount of what would have been my RMD. Then depending on circumstances I may do an additional Roth conversion so as to not exceed the IRMAA amount for this year.

    #6276
    Alan S.
    Participant

    Yes, that is correct. In 2020, with no RMDs, a person can do a QCD, a non conversion distribution, or a conversion in any order, or do multiple such transactions in any order they wish. These QCDs can be more or less than what the RMD would have been (but not over 100k), and the conversions can also be more or less than the RMD would have been. In other words, the amount that would have been the RMD is totally immaterial.

    #6282
    pnaik1
    Participant

    I will interpret your answer as follows
    I do not require to take RMD this year and
    I can do Roth conversion without penalty.
    Is that right?

    #6287
    Alan S.
    Participant

    Yes, that is correct. There is no penalty, however you will owe ordinary income tax.

    #6288
    pnaik1
    Participant

    Alan
    Thanks

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