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YOUR FIRST RMD AND SEP IRAS: TODAY’S SLOTT REPORT MAILBAG

By Andy Ives, CFP®, AIF®
IRA Analyst

Question:

Hi,

I turn 72 this year and have to take my first required minimum distribution (RMD). I am also in the process of converting most of my IRA into a Roth IRA. I know I have to take my RMD first before the conversion. Since this is my first year of RMDs, I know one of the options is to delay the RMD until April of next year. Is it possible to set aside the RMD amount in my IRA for the RMD to be done in 2023 but do the Roth conversion first this year (2022)? Or will I have to do the RMD in 2022 (even though I have the option of waiting until April of next year) before I do the planned Roth conversion this year?

Thanks,

Glenn

Answer:

Glenn,

Even though an IRA owner has the option to delay his very first RMD to April 1 of the following year, that does not permit him to do Roth conversions before taking the delayed RMD. If an RMD is required for 2022 (as is the case here), the RMD must be taken before any funds can be converted. This is true even if this is your first RMD and it could potentially be delayed until April of 2023. Of course, once the 2022 RMD is taken, you can then convert as much as you want over and above the RMD amount.

Question:

I will be 72 this year and will be taking my first RMD. I know that if I have 2 traditional IRAs I can calculate the RMD amount for each IRA, and then I can take the total RMD from just one of those IRAs (rather than an RMD from each IRA). My question: If I have an IRA and a SEP IRA, after calculating the RMD from each of them, can I take the total RMD from just one of them? I am not sure if a SEP IRA and an IRA are considered to be different types of retirement accounts (like a 401K and an IRA).

Please advise.

Thank you.

Chris

Answer:

Chris,

SEP IRAs and traditional IRAs (as well as SIMPLE IRAs) can be aggregated for RMD purposes. You are correct that the RMD for each account must be calculated separately, but the total RMD for all IRA accounts (in your case the SEP IRA and the traditional IRA) may be taken from one (or more) of the IRA accounts.

https://www.irahelp.com/slottreport/your-first-rmd-and-sep-iras-todays-slott-report-mailbag

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