IRA Distribution as “Earned Income” to fund a ROTH

During a prospective client interview, the prospect indicated he’d read where one could treat a post-70.5 RMD from an IRA as “earned income” that could then be used to qualify for a ROTH IRA contribution? Anyone run across that notion? Thanks.



Right.
Prospect misinterpreted what he read. He probably was reading that Roth contributions can still be made after 70.5 even when RMD are being taken. But the RMDs are NOT taxable compensation. If he wants to, be can convert amounts to a Roth after first taking his RMD, none of which can be converted. The 100,000 modified AGI limit applies to conversions until 2010, but does not include the conversion itself OR the RMD.



Unless, of course, he greets everyone with “Welcome to Wal-Mart”. Al



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