There are several reasons why you might want to convert assets in your Traditional IRA to a Roth IRA:
- You want to lower the taxable impact of required minimum distributions (RMDs) and other elective withdrawals.
- You want your children to inherit your IRA assets but don’t want to burden them with higher taxes resulting from them having to take RMDs from their inherited IRA every year for 10 years until the account is emptied out.
With a Roth IRA, all distributions are tax-free once you hit age 59½. While you’re alive, you don’t need to take RMDs. And if your children inherit your Roth IRA, they’ll never have to pay taxes on distributions, even though they will need to empty out the account within ten years.
If you’re already taking RMDs from your Traditional IRA, you might think that you can kill two birds with one stone by converting that amount to a Roth IRA.
But you can’t.
The IRS doesn’t allow RMDs to be used to directly fund Roth IRA conversions. Only after you’ve taken the full amount of your RMD for the year can you take additional distributions from your IRA to fund a Roth IRA conversion.
A quick hypothetical example
Theresa, 74, is a widow who has saved more than $3 million to live on during retirement, including a $1,000,000 Traditional IRA. She would like to convert $100,000 of her IRA to a Roth IRA every year for the next ten years.
Her 2026 RMD is $39,215. She will have to take that full RMD before she can take the additional $100,000 out to fund a Roth IRA conversion. Because all Traditional IRA distributions are taxable, she’ll end up having to pay taxes on the entire $139,215 amount.
This distribution, combined with her other sources of income, could potentially push her into a higher tax bracket and increase her Medicare premiums.
One way around this tax hurdle
Qualified Charitable Distributions (QCDs) are donations made from directly from Traditional IRAs to qualified nonprofit organizations. They can be used to offset RMDs for the year if they’re made before the RMD. In 2026, you can make a QCD of up to $111,000 from your IRA.
In Theresa’s situation, she could make a QCD equivalent to her $39,216 RMD in 2026. That would satisfy her RMD requirement and she wouldn’t have to pay taxes on this amount. However, she cannot deduct the QCD as a charitable donation.
After taking the QCD, she could then convert an additional $100,000 of her Traditional IRA to a Roth IRA. Only that $100,000 would count as taxable income. She can repeat this same strategy every year.
Another option—make regular Roth IRA contributions
If you’re taking RMDs and still earning money from a job or a side gig, you can still make regular Roth IRA contributions. In 2026, the annual limit for those over 50 is $8,600 or the amount of earned income, whichever is less.
Other considerations
Keep in mind that you must own a Roth IRA account for at least five years before you can start taking tax-free withdrawals.
That’s why it’s often recommended that some people complete Roth IRA conversions before they start taking RMDs from their Traditional IRAs.
If you’re considering a Roth conversion, you may want to speak to a tax professional to see if there might be other strategies you can use to reduce their taxable impact.
This material has been provided for general informational purposes only. Canby Financial Advisors does not offer tax advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax professional on any tax-related issues.
This article was authored by Martin Baker and Jeffrey Briskin. Martin is a financial advisor and Director of Financial Planning with Canby Financial Advisors, LLC, an Investment Adviser registered with the U.S. Securities & Exchange Commission. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or ability. Martin can be reached at 508.598.1082 or mbaker@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
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