Turning age 73 often comes with a new financial milestone: required minimum distributions (RMDs) from traditional IRAs or 401k plans. These withdrawals are mandatory and treated as ordinary income for tax purposes.
But what if you don’t need the money from your RMD for everyday expenses? Many retirees wonder if it’s possible to keep building tax-advantaged savings instead of simply withdrawing and spending. One common question is whether those RMD funds could be redirected into a Roth IRA.
The answer is nuanced. You may be able to contribute to a Roth IRA after taking your RMD if you have enough earned income and stay within the annual contribution limits. However, the RMD itself cannot be rolled over or counted as compensation for contribution purposes.
This guide explains how RMDs and Roth IRAs work together, what the IRS allows, and the rules to keep in mind if you’re considering this strategy.
Understanding Required Minimum Distributions (RMDs)
Required minimum distributions (RMDs) begin once you reach age 73. These withdrawals apply to traditional IRAs and 401k plans and are treated as ordinary income for tax purposes. The IRS determines how much you must take out each year using your account balance and life expectancy.
Unlike traditional retirement accounts, a Roth IRA has no RMDs during the owner’s lifetime. This means the money in a Roth IRA may continue growing tax-free for as long as the account holder lives.
It’s important to remember that RMDs cannot be directly rolled over into a Roth IRA. However, after paying taxes on your RMD, you may use that withdrawn amount to contribute separately to a Roth IRA if you meet the income and contribution requirements.
Key Points About RMD Calculations
✅ Use the IRS Uniform Lifetime Table in Publication 590-B to determine your distribution period each year.
✅ If you have multiple traditional IRAs, calculate the RMD for each account separately. You can take the total withdrawal from one or more accounts.
✅ The penalty for not following RMD rules can be significant (explained below).
📝 Note: The IRS rules for RMD calculations can be complex. Working with a qualified tax or financial professional may help avoid costly mistakes.
When Do RMDs Start?
RMDs start at age 73 and must be taken annually until your account is fully distributed. You’re generally required to take your RMD by December 31 each year. However, your first RMD can be delayed until April 1 of the year after you turn 73.
What Happens If You Miss an RMD?
Failing to take an RMD can trigger an excise tax of 25% on the amount not withdrawn. This penalty may be reduced to 10% if the mistake is corrected within two years. Taking your RMD on time — by December 31 in most cases — can help you avoid these penalties.
📌 Also read: Everything You Need To Know About Missed RMD’s
Can You Use RMDs to Fund a Roth IRA?
You may contribute to a Roth IRA after taking your RMD if you have enough earned compensation and stay within the annual contribution limit. The RMD itself is taxable and does not count as compensation for Roth IRA contribution purposes.
RMDs Do Not Count as Earned Income
To contribute to a Roth IRA, you must have earned income—such as wages, salaries, or self-employment income. RMD withdrawals are not considered earned income. This means you cannot use an RMD as the basis for a Roth IRA contribution unless you also have enough earned income to support it.
Contribution Limits for 2025
- $7,000 if you are under age 50
- $8,000 if you are age 50 or older
✏️ Hypothetical Example:
If your RMD for 2025 is $7,500 but your earned income for the year is only $3,000, you may contribute a maximum of $3,000 to a Roth IRA. This is because contributions cannot exceed your earned income or the annual limit, whichever is lower.
📝 Note: The income required to max out Roth IRA limits can vary. It’s important to understand how “income” is defined for tax purposes and what deductions apply before calculating your contribution capacity.
RMDs Are Taxed Separately
Although RMDs do not count as earned income, they are still subject to ordinary income tax. This is because contributions to tax-deferred plans like traditional IRAs or 401k plans were made with pre-tax dollars.
✏️ Hypothetical Example:
If your RMD is $5,000, you cannot roll or convert that $5,000 directly into a Roth IRA. However, if you have sufficient earned income, you may still make a separate Roth IRA contribution using after-tax funds within the annual limits. The tax you’ll owe on the RMD depends on your tax bracket and the rates in effect when you withdraw the money.
How to Use Your RMD to Support a Roth IRA Strategy
You cannot directly roll an RMD into a Roth IRA, but you can still use it as part of a larger plan. The key is to take the RMD first and then use other after-tax funds to contribute to or convert into a Roth IRA if you qualify.
How the Standard Approach Works
Take your RMD as required, then make a separate Roth IRA contribution using other after-tax money if you have earned compensation and are within income limits. For 2025, the limit is $7,000 (or $8,000 if age 50 or older). RMDs themselves do not count as compensation and cannot be contributed directly.
✏️ Hypothetical Example:
Your RMD for 2025 is $6,000, and you earned $10,000 from part-time work. You take the $6,000 RMD (taxable) and separately contribute $7,000 to a Roth IRA using other after-tax funds. You meet both the earned income and contribution limit rules.
How to Reduce Future RMDs
You can lower or avoid future RMDs by converting amounts above your RMD to a Roth IRA. Roth IRAs have no lifetime RMDs for the original owner. Roth conversions are taxed as ordinary income because traditional IRA and 401k contributions were made with pre-tax dollars.
✏️ Hypothetical Example:
Your traditional IRA is worth $200,000, and your RMD this year is $7,500. After taking your RMD, you decide to convert $20,000 from the IRA to a Roth IRA. You’ll pay ordinary income tax on the $20,000 conversion now, but future growth on that converted amount will be tax-free and won’t trigger RMDs later.
Key Facts About Roth IRAs
A Roth IRA is designed to let your money grow tax-free once it’s inside the account. You make contributions with after-tax dollars. In return, if you meet the rules for a “qualified withdrawal,” your distributions—including earnings—are generally tax-free. This makes a Roth IRA different from a traditional IRA, where you may get an upfront tax deduction but owe taxes on withdrawals later.
Eligibility Rules
You can contribute to a Roth IRA only if you have earned income and your modified adjusted gross income (MAGI) falls within certain limits. For 2025:
- Single or head of household: Phase-out range is $150,000–$165,000
- Married filing jointly: Phase-out range is $236,000–$246,000
Once your income exceeds the top of the range, you cannot make a direct Roth IRA contribution.
Contribution Limits for 2025
The maximum combined contribution to all IRAs (traditional and Roth) is:
- $7,000 if under age 50
- $8,000 if age 50 or older
This limit applies to all of your IRA accounts together. Since required minimum distributions (RMDs) begin at age 73, many older savers can still contribute up to $8,000 in 2025 if they have enough earned income.
Withdrawal Rules
You can always take out the amount you contributed (your principal) tax- and penalty-free. However, withdrawing earnings before a qualified distribution may trigger taxes and a 10% penalty. To make a qualified withdrawal of earnings, both of the following must be true:
- You’re at least 59½ years old
- At least 5 years have passed since your first Roth IRA contribution
If either condition isn’t met, taxes and penalties may apply to the earnings portion of your withdrawal.
📝 Note: This “5-year rule” is especially important for retirees who plan to tap their Roth IRA soon after opening it.
No Required Minimum Distributions (RMDs)
Unlike traditional IRAs, Roth IRAs have no lifetime RMDs for the original owner. You’re not required to take distributions even after turning 73, which means your savings can keep compounding tax-free for as long as you live.
Wrapping It Up
RMDs can’t go straight into a Roth IRA, but you can still grow your retirement savings if you have enough earned income to make a separate Roth contribution or do conversions above your RMD. Knowing the rules on taxes, income limits, and contribution caps can help you avoid surprises.
If you’re unsure how to fit RMDs and Roth contributions into your plan, consider running the numbers or talking with a financial or tax professional. A little planning now can help you make the most of your retirement savings over time.
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