The 85-year-old's Roth conversion is a beneficiary question

A reader wrote to Ed Slott this week with a premise worth testing: Roth IRAs carry no required minimum distributions, she reasoned, so an inherited Roth IRA should not either. Slott's answer in his Thursday mailbag splits the claim — owners take no RMDs while living, but beneficiaries of inherited Roth IRAs do, a confusion he says is widespread.

The schedule turns on who inherits. Only someone who qualifies as an "eligible designated beneficiary" and elects to stretch faces annual RMDs; everyone else — Slott's "non-eligible designated beneficiary" — falls under the ten-year payout rule, which asks nothing in years one through nine and then requires the account to be empty by the end of the tenth year after the owner's death, with that final distribution treated as the beneficiary's RMD.

On paper, that schedule reads as no schedule at all: a beneficiary who has been told Roth IRAs do not carry RMDs can leave the account alone for nine years and then face one year in which the entire remaining balance must come out. Slott describes the inherited Roth as a tax-free inheritance, which puts the deadline in the timing-and-liquidity column rather than the tax column.

The desk-level instruction differs by category in a way that is easy to get backwards: an eligible designated beneficiary who elects the stretch has an annual distribution to take even when the money is not needed, while a ten-year-rule beneficiary has no annual obligation at all and one deadline that does not move. Because the clock starts at the owner's death rather than at any distribution, a beneficiary who learns the rule in year nine has one year to finish what nine years of quiet did not require.

The mailbag's second question is harder to answer and more useful: an 85-year-old reader with a $1.3 million IRA and four children, two of them on Social Security Disability Insurance, asked whether converting at her age makes sense and whether the children on SSDI would still be bound by the ten-year rule.

Slott's answers reorder the analysis: beneficiaries who are disabled are eligible designated beneficiaries and can stretch RMDs over life expectancy instead of emptying the account on the ten-year clock, and beneficiaries on SSDI are automatically considered disabled.

One fact — disability status — separates the four children into two payout regimes, and it has no connection to the size of the account or the relationship to the owner. Slott does not address whether either of the other two children might qualify as an eligible designated beneficiary on another basis, but read straight from his definitions a single $1.3 million IRA with four beneficiaries is not one inherited account on one schedule; it is two.

On the conversion, Slott disposes of the age question cleanly: there are no age restrictions. What older IRA owners weigh, he writes, is whether enough time remains for tax-free accumulation to offset the additional taxable income a conversion generates, which is why many decline; owners who want to leave a tax-free inheritance to children or grandchildren may find a conversion worthwhile at any age.

That carve-out is where the 85-year-old's real question sits, and the usual framing hides it: asking whether one is too old to convert treats the decision as a bet on the owner's remaining years of tax-free compounding, while an owner whose objective is the inheritance is more accurately betting on the beneficiary's payout period. An eligible designated beneficiary's period runs on life expectancy; a non-eligible designated beneficiary's runs to year ten; the owner's age at conversion changes neither.

As this publication has argued, the retirement-income conversation has become a documentation problem, and the mailbag is a clean illustration: the fact that decides whether this $1.3 million pays out over ten years or over a lifetime is a determination — disability, automatic for SSDI recipients — that the family generally already holds and that has nothing to do with the portfolio. An advisor can do more with the beneficiary list and each heir's disability status than with any projection.

For the reader with four children and $1.3 million, the conversion question and the RMD question resolve against the same list of names: disability status sets the payout period, and the payout period is what the conversion is meant to fund. The beneficiary file is worth settling before any projection gets run.