Ed Slott Urges Roth IRA Conversions Before Age 73 to Cut Future RMDs
Updated
Updated · Morningstar · Sep 17
Ed Slott Urges Roth IRA Conversions Before Age 73 to Cut Future RMDs
3 articles · Updated · Morningstar · Sep 17
Summary
Age 65 to 73 is often the best window for retirees to convert traditional IRA assets to Roth accounts, Ed Slott said, because earned income has usually fallen and required minimum distributions have not yet begun.
Lower tax brackets in those years can let retirees fill the 12%, 22% and 24% bands, reducing future RMDs and building more tax-free assets for themselves or heirs.
Roth conversions make less sense when retirees need IRA withdrawals for living expenses, and Slott said beneficiaries’ tax brackets can argue for keeping some traditional IRA assets instead of converting everything.
After age 73, conversions are still possible but less efficient because the annual RMD must be withdrawn and taxed first and cannot be converted.
Using non-IRA cash to pay the conversion tax preserves more of the amount moved into the Roth; for people under 59½, withholding from the IRA can also trigger a 10% early-withdrawal penalty.