RMD re-invested into a Roth?

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k1lesm1tty
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RMD re-invested into a Roth?

Post by k1lesm1tty »

Hi everyone,
Has anyone rolled over RMD monies from an inherited IRA into a ROTH? I have an inherited IRA from an aunt who passed away and have begun taking the RMD's. The amount of income isn't much and I'd like to invest it instead. I understand that I can't simply roll the distributions into the ROTH due to tax purposes, but I'm wondering if there's a better option than the round-about way of having the distributions sent to my bank account and then re-invested from there?

Hopefully this makes sense. Thanks in advance for the help!
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LadyGeek
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Re: RMD re-invested into a Roth?

Post by LadyGeek »

Welcome! I fixed the spelling in the thread title. Roth is not an acronym. It's the name of a US senator. See the wiki: Roth IRA
Named after US Senator William Roth, Roth IRAs were established by the Taxpayer Relief Act of 1997.
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retiringwhen
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Re: RMD re-invested into a Roth?

Post by retiringwhen »

Nope, there is no better way. An inherited IRA must be taken as a taxable distribution, no alternative options.

Plussing up your 401K, Roth IRA or other pension contributions by the same amount as the RMD is a perfectly good strategy (aka lower take home pay by the amount of the RMD).

Money if fungible. Once it hits your checking account, the source no longer matters.
chemocean
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Re: RMD re-invested into a Roth?

Post by chemocean »

You can not rollover any RMDs into a Roth IRA. Since you indicate that the IRA came from your aunt (next generation), I will assume that you are earning wages.
You can invest earned income into a Roth up to $6000 directly into a Roth and use the inherited IRA withdrawal to replace that spending money. A more elaborate method is make a non-deductible contribution to your employer plan and execute a back-door Roth conversion and use the inherited IRA distribution to offset your spending funds as a result of the contribution.
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BolderBoy
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Re: RMD re-invested into a Roth?

Post by BolderBoy »

k1lesm1tty wrote: Tue May 11, 2021 8:24 am... but I'm wondering if there's a better option than the round-about way of having the distributions sent to my bank account and then re-invested from there?
Nope. That is the cleanest way to do it.
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retiredjg
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Re: RMD re-invested into a Roth?

Post by retiredjg »

k1lesm1tty wrote: Tue May 11, 2021 8:24 am ...but I'm wondering if there's a better option than the round-about way of having the distributions sent to my bank account and then re-invested from there?
If the inherited IRA and the Roth IRA are at the same place, you could have the distribution sent to a taxable account at that same location and then use that money to fund the Roth IRA. This would be simpler than sending it to your bank account and back.
retiringwhen
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Re: RMD re-invested into a Roth?

Post by retiringwhen »

retiredjg wrote: Tue May 11, 2021 3:44 pm
k1lesm1tty wrote: Tue May 11, 2021 8:24 am ...but I'm wondering if there's a better option than the round-about way of having the distributions sent to my bank account and then re-invested from there?
If the inherited IRA and the Roth IRA are at the same place, you could have the distribution sent to a taxable account at that same location and then use that money to fund the Roth IRA. This would be simpler than sending it to your bank account and back.
Possibly faster, but unlikely less effort. At Vanguard and Fidelity, it is the exact same set of questions and button clicks to go through a bank or a taxable brokerage. Unless you are floating the money through bank by having prepositioned funds, the bank likely adds up to a week of funds availability delays.
Topic Author
k1lesm1tty
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Re: RMD re-invested into a Roth?

Post by k1lesm1tty »

Thank you to everyone who responded. This is all in Vanguard so I think it should be a smooth operation. Much appreciated!
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