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Roth Conversions After RMDs: Options for Managing Taxes and an Inheritance
RMDs don’t rule out partial Roth conversions. Compare them with charitable giving, taxable accounts, insurance and beneficiary planning.
At 75 and already taking required minimum distributions (RMDs), a retiree with a large traditional IRA may have limited room for tax efficient Roth conversions. That doesn’t mean every option has closed. Smaller conversions, thoughtful use of withdrawals and planning for who inherits which assets can still help shape the tax impact on both the account owner and their family.
A large traditional IRA can bring sizeable RMDs, which may increase income taxes and Medicare’s income-related monthly adjustment amounts, or IRMAAs. Those adjustments can raise Medicare premiums by hundreds of dollars a month. A non-spouse beneficiary who inherits an IRA generally has to withdraw the full balance within 10 years, potentially during their peak earning years.
That combination makes the question less about whether a full conversion is possible and more about which steps could improve the family’s overall plan. Estate and business planning executive Al Kingan of MassMutual says it’s not too late to consider Roth conversions. His suggested starting point is measured partial conversions rather than an all-at-once move.
Consider partial conversions after the RMD
RMDs must be withdrawn from a traditional IRA before any additional funds are converted, and the RMD itself can’t be converted to a Roth. After taking that required withdrawal, the account owner can look at converting some of the remaining money.
Kingan suggests assessing how much could be converted while staying within the current tax bracket. If the person’s highest applicable rate is 22% or 24%, for example, they could estimate the amount that fits under that bracket’s limits. The source gives $50,000 a year as an example of a possible conversion amount; whether that works depends on the person’s actual income and tax situation.
Medicare costs matter alongside the tax bracket. A conversion that appears manageable for income taxes may affect IRMAAs, so the person would need to weigh both costs before deciding on an amount. Even if only part of the traditional IRA becomes Roth money during the owner’s lifetime, gradual conversions may still alter the eventual mix of assets inherited by family members.
Put unneeded RMDs to work thoughtfully
When RMD money isn’t needed for household spending, one option Kingan describes is investing it in a taxable investment account. He says that at the owner’s death, the account’s value may receive a step-up in basis. Beneficiaries could then sell assets soon after inheriting them without owing tax on appreciation that occurred during the owner’s lifetime. Any increase in value after inheritance could be taxable.
This approach may give beneficiaries more control over when to sell than an inherited traditional IRA, which is subject to the 10-year withdrawal period. It also involves investing money that has already been withdrawn and may be taxable, so it isn’t a universal substitute for a Roth conversion. The useful comparison is how each option fits the owner’s spending needs, tax picture and inheritance goals.
Charitable distributions can affect conversion room
For someone who already gives to charity, a qualified charitable distribution (QCD) may help coordinate giving with RMDs. A QCD transfers money directly from an IRA to a qualified charity. The source says it can count toward the RMD and reduce adjusted gross income, potentially leaving more room in the current tax bracket for a partial Roth conversion.
Kingan cites a QCD limit of $111,000 for 2026. That figure and the eligibility rules should be checked against the person’s circumstances before acting. A QCD is relevant for people who want to support eligible charities; it isn’t simply a way to move money into a Roth or avoid a withdrawal that would otherwise support living costs.
Weigh insurance and beneficiary choices
Charles Czajka, founder of Macro Money Concepts, suggests considering life insurance as one way to provide heirs with funds for taxes on inherited retirement assets. His proposed approach is to use the portion of RMDs that isn’t needed for expenses to pay for coverage. Whether that makes sense depends on the cost and terms of coverage, as well as the owner’s needs and family plan.
Beneficiary designations and the type of assets left to each person can also matter. Kingan suggests considering heirs’ tax brackets when dividing an inheritance: a lower-bracket beneficiary might receive more traditional IRA money, while a higher-bracket beneficiary could receive Roth assets or other investments. His example imagines an owner converting $1 million to a Roth IRA and retaining $3 million in a traditional IRA. The Roth funds might go to the owner’s children, while the traditional IRA goes to grandchildren who may be earlier in their careers and have lower earnings. That’s an illustration, not a recommended division for every family.
Build the plan around the family
Once RMDs have started, converting a large balance in a tax efficient way may be difficult, and a complete conversion may no longer fit. But the choices can still include partial conversions, charitable giving, investing unneeded withdrawals, insurance and coordinating beneficiaries with the kinds of assets they receive.
These decisions depend on individual tax and financial circumstances. A financial professional can help assess how one choice affects the others, especially when Medicare premiums and heirs’ potential tax bills are part of the same plan. The practical takeaway: focus on the amount that can be converted or redirected each year without losing sight of the spending needs and inheritance goals it is meant to serve.
Readers with retirement questions can submit them anonymously through this form or by email at [email protected]. Some questions may be edited, combined or not published.
