Can I Transfer My IRA to a Roth After Age 70?

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Traditional Individual Retirement Accounts have existed since 1974, while Roth IRAs were introduced in 1997. People may want to convert to a Roth IRA, even after they have retired, because of the difference in tax treatment and required distributions.

Eligibility

  • You can contribute or convert money to a Roth IRA regardless of your age, so even if you are older than 70, you may be able to convert your traditional IRA to a Roth IRA. As of 2010, the IRS does not restrict who can convert based on income.

Taxes

  • When you convert funds from a traditional IRA to a Roth IRA, you have to pay income taxes on the money converted. When you file your taxes, the amount of the transfer must be listed as taxable income. This amount increases your taxable income for the year, and it could move you into a higher tax bracket, depending on the size of the transfer. Therefore, you should consider whether you will be in a higher income tax bracket in the future before converting.

Required Distributions

  • Money you convert from your traditional IRA to a Roth IRA does not count toward your minimum required distributions (MRD) from your traditional IRA for the year. For example, if you are required to take $15,000 out of your IRA but rolled over the entire balance, you would have to pay a 50 percent penalty on the $15,000 you did not take out. However, once the money is in a Roth IRA, you will not have to take minimum distributions in future years.

Waiting Period

  • The IRS requires a five-tax-year waiting period before you can take qualified distributions after you contribute the money, even though you are older than 59 1/2 years old. If you don't expect to take money out in the next five years, this will not be a problem. However, if you are planning to tap the account for your living expenses, you would have to a pay a 10 percent early withdrawal penalty for any money you take out before five tax years pass.

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