Reducing traditional IRA balance by both required minimum distributions and Roth Conversion distributions after age 70 1/2

[Guest fuzzydogs]

I am trying to minimize my tax burden at age 70 1/2 by reducing my IRA's balance.

Each year, I am converting a computed amount (determined by keeping my AGI under $32,000 to prevent paying taxes on Social Security Benefits) to a ROTH IRA.

My question is: Once I begin distributions at 70 1/2 using the recalculation method, can I continue to reduce the Traditional IRA's balance by not only the required minimum distribution; but also, by additionally converting part of the balance to a ROTH IRA?

My goal is to minimize future taxes by accumulating a greater portion of the IRA distributions in a non taxable account(ROTH IRA). Although the total amount of the IRA distributions and taxes due would remain constant, the future tax burden would be reduced.

[JAMES PATRICK]

When you become 70 1/2 you can continue to convert small portions of your IRA to a ROTH, just not the MRD portion.

[Guest fuzzydogs]

Thanks for the reply. But could you explain how you determine the small amount? I cannot find this info in PUB 590, could you reccommend a publication or book which explains this and also the advantages and drawbacks of choosing methods of computing MRD.

Also are you using the term MRD as emcompsing all 20 years of distributions or only each year's calculated MRD to which the Roth contribution must be excluded.

[JAMES PATRICK]

The MRD I am referring to is the amount you are required to withdraw each year.

The small amount I referred to was in response to you saying you wanted to keep conversions below a certain amount($32k) to avoid paying tax on your Social security benefits.

Go to www.fairmark.com and read the info they have on Roths.

[Appleby]

My question is: Once I begin distributions at 70 1/2  using the recalculation method, can I continue to reduce the Traditional IRA's balance by not only the required minimum distribution; but also, by additionally converting part of the balance to a ROTH IRA?

Yes. Providing you meet the eligibility requirements, i.e., your MAGI is not over $100,000 and your tax filing status is not married filing separately

could you reccommend a publication or book which explains this and also the advantages and drawbacks of choosing methods of computing MRD.

You mentioned using the recalculation method – technically, there is no other option for you as the IRA owner. As the IRA owner, you compute your RMD amount using the uniform life expectancy table, unless your spouse is your sole primary beneficiary and is more than 10-years your junior, in which case you could use either the uniform table or the joint life expectancy table.

The uniform table will produce results of a larger RMD amount than the joint tables