How do the 2025 RMD age and rule changes affect Roth IRAs and Roth conversions?
Executive summary
The SECURE 2.0-era RMD changes raise the lifetime RMD start age to 73 for many in 2025 and eliminate RMDs from designated Roth accounts in workplace plans while the owner is alive — but Roth IRAs remain exempt from lifetime RMDs and conversions still trigger current-year taxable income and five‑year holding rules (IRS, FINRA, Schwab) [1][2][3]. Converting to a Roth can reduce future RMD-driven taxable income, but conversions are taxed in the conversion year and may affect Medicare and other benefits; beneficiaries of inherited Roths still face distribution rules [4][5][6].
1. What changed in 2025 — the headline rules that matter
Congress and IRS guidance pushed the RMD starting age to 73 for most people in 2025, and the IRS reiterates that Roth IRAs are not subject to lifetime RMDs for the original owner while heirs remain subject to RMD rules after death [1][7]. The FINRA/industry calculators and custodians reflect that Roth balances are excluded from RMD calculations for owners while still alive [2].
2. Designated Roth 401(k)s: an important, recent pivot
SECURE 2.0 eliminated RMDs for designated Roth accounts inside 401(k) and 403(b) plans while the participant is alive, a change the IRS highlighted when urging retirees about deadlines — that makes Roth-style workplace balances behave more like Roth IRAs for lifetime RMD purposes [8]. Custodians and advisers point to that change as a practical reason to prefer designated Roth balances inside plans when tax‑free growth and no lifetime RMDs are priorities [9].
3. How Roth conversions interact with the new RMD landscape
Financial firms and advisers note a basic tradeoff: converting pre‑tax dollars into a Roth reduces the size of future taxable RMDs because Roth accounts aren’t subject to lifetime RMDs, but conversions are taxable in the year completed, counted as ordinary income, and must be carefully timed against RMD obligations [9][4]. Fidelity expressly warns: if you’re required to take an RMD in the year you convert, you must take it before converting [4].
4. The tax timing and five‑year rule you can’t ignore
Every conversion produces taxable income in that conversion year — firms remind clients that a conversion in 2025 increases 2025 taxable income and will be reported on the 2025 return (tax due April 2026) [10][11]. Separate from income tax, Roth conversions start a five‑year clock (each conversion has its own five‑year period) before converted earnings can be withdrawn penalty‑free if you’re under 59½ (Investopedia) [12].
5. Why some advisors say 2025 might be a “window” for conversions — and the counterarguments
Multiple advisers and independent pieces argue 2025 could be an opportune year to convert because RMD age moved to 73 and tax‑law changes around 2025 created planning windows; conversely, others warn the One Big Beautiful Bill and related rules produce complicated interactions — Medicare IRMAA effects, phased deductions, and temporary tax provisions can make large conversions costly if you don’t model them [13][14][5]. Industry commentary stresses multi‑year planning rather than one‑off, aggressive conversions [14].
6. Practical sequencing and deadlines to avoid mistakes
Custodians and tax guides emphasize operational deadlines: Roth conversions must be completed by December 31 to count in a given tax year, and RMDs for the first year can be pushed to April 1 of the following year (but then you may face two RMDs in one calendar year) — so sequence withdrawals and conversions deliberately to avoid converting funds that should instead satisfy an RMD [1][4][3].
7. The inherited-account wrinkle — Roths aren’t a permanent escape hatch for heirs
Roth IRAs avoid lifetime RMDs for the owner, but IRS and major custodians warn heirs still face distribution requirements under the SECURE-era inherited IRA rules; recent guidance requires certain beneficiaries to take annual RMDs beginning in 2025 under the 10‑year and related regimes — inherited Roth withdrawals may be tax‑free if the five‑year aging requirement was met, but they’re not automatically exempt from withdrawal timing rules [6][15].
8. Bottom line for readers deciding whether to convert
Converting reduces future RMD-driven taxable income because Roths don’t trigger lifetime RMDs and designated Roth plan balances now enjoy similar shelter while living, but conversions create immediate taxable income, may interact with Medicare and phaseouts, and invoke separate five‑year rules and beneficiary complexity — advisers and custodians urge modeling multiple years, sequencing RMDs and conversions correctly, and consulting a tax professional before acting [9][5][4].
Limitations and sources: This analysis uses IRS guidance and industry commentary in the supplied documents. Available sources do not mention any post‑2025 changes beyond the items cited here; readers should consult their custodian and tax adviser for personalized modeling [1][8][14].