Ian Berger, JD
IRA Analyst
If you have multiple traditional IRAs and want to do a 60-day rollover (or Roth conversion) in a year when a required minimum distribution (RMD) is due, the IRS has a surprise for you.
RMDs from multiple traditional IRAs (and SEP or SIMPLE IRAs) can be aggregated and paid from any one or more of those IRAs.
But what if you have multiple IRAs and want to do a rollover (or conversion) of one or more of your IRAs during a year when a RMD is due? The first dollars distributed out of an IRA (or plan) during an RMD year are considered to be RMDs. In addition, RMDs cannot be rolled over. But how do these rules apply if the amount you take out from an IRA is more than the RMD due from that IRA for the year?
Before the IRS issued proposed RMD regulations in 2022, you could take out just the RMD due from that IRA and then roll over or convert the rest. In other words, it wasn’t necessary to withdraw the total RMDs due from all your IRAs that year before being able to do a rollover. You only needed to satisfy the RMD for that particular IRA.
But the 2022 proposed regulations established a new rule, and the IRS just confirmed the new rule in its final regulations. This new rule says that if you have multiple IRAs, all of the RMDs due from each of your IRAs in a calendar year must be satisfied before you can do a rollover (or Roth conversion) of any IRAs during that year. (By contrast, you don’t have to take RMDs first if you do a direct transfer from one traditional IRA to another traditional IRA – instead of a 60-day rollover or a conversion.)
Example: Consuelo has three traditional IRAs: IRA #1, IRA #2 and IRA #3. She turns age 73 in 2024 and must start taking RMDs from those IRAs. Her 2024 RMD from IRA #1 is $4,000, her RMD from IRA #2 is $6,000, and her RMD from IRA #3 is $8,000. This gives her $18,000 of total 2024 RMDs. Before taking any RMDs this year, Consuelo withdraws $5,000 from IRA #1 and wants to convert it to a Roth IRA. Since her total 2024 RMDs are $18,000, Consuelo can’t convert any of the $5,000 withdrawal. Instead, she must apply it to the total RMD, and it will just be a taxable distribution. But she has reduced her 2024 RMD shortfall to $13,000 ($18,000 – $5,000).
The next day, Consuelo withdrawals $25,000 from IRA #2 in another attempt to do a Roth conversion. The first $13,000 of that withdrawal must be applied to wipe out the RMD shortfall. But she can convert the remaining $12,000.