But if you have the money available in other sources, you can rollover the entire 100k distribution, then pay the tax liability out of your other sources. Do you see any problem? Are there rules against becoming a “serial” back door Roth IRA contributor? The traditional IRA will remain a traditional IRA, and you’ll have to set up a separate Roth IRA account. I recently began a new job and my employer offers a ROTH 401k and ROTH TSP with 5% matching into each (for a total of 10% matching). So my question does the amount I converted go towards my annual contribution or can I do the max $5500 for 2016 and would you suggest going half and half in the IRA from the rollover and Roth or all in the IRA to maximize my deduction? I know I can contribute for 2015 up until April 15, but my question is this: Does the income count for the year in which the transaction occurred, or the tax year for which I’m making the Roth contribution? @Thom there is absolutely no restriction on how much you can convert each year from a traditional IRA to a Roth. The 401k should be taxable on conversion since it was tax deferred in the accumulation phase. Anyone that worked their whole life, but is now living primarily off of social security almost assuredly retired into a lower tax bracket (again, favoring the IRA). 2) If I don’t perform a reverse roll over, but go ahead with the non-deductible Traditional IRA to Roth IRA full conversion (or full distribution) of the fund (earning and after tax contribution). Check with an accountant though, there are all kinds of unusual provisions buried in the tax code, so I could be wrong. Plus, it was in 2008 so my portfolio was down almost 40%. If you withdraw money from the Roth to pay the tax, you will have to pay the penalty on the amount withdrawn. What’s more, tax savings are possible even without an extended period of post-conversion ownership. My income is not an issue (low) :(. Thinking about converting your retirement account to a Roth IRA? Do you know of such a calculation? Thanks in advance. But I’m confused on your last comment. Great article. (It’s no problem as I still have all my statements)? I’m thinking it would be when I file taxes since the notice indicated the entire amount would roll over to RIRA untaxed. You don’t have the 23k anymore to move back into the IRA. The SECOND 5-year rule applies not to Roth contributions, but to Roth conversions from traditional pre-tax retirement accounts, and determines whether Roth conversion PRINCIPAL will be penalty-free. I plan to convert from IRA to Roth IRA annually. I am now looking back at my historical, non-deductible traditional IRA contributions and realize that I have made about 15k in such contributions over the years. Post-Retirement Roth Conversion. It is amazing how many people in their seventies are getting taxed on over $105,050 a year once they have SS and RMDs! Let me start by saying that I’m not even remotely financially savvy. I have a traditional IRA, portions of which I have converted to a ROTH IRA over the last three years. So it is with income taxes more times than we like to admit! in order for their taxable income to land them in that bracket. That applies to all retirement plan considerations. But, is a Roth IRA conversion really a good idea? Can I start moving the same amount from my Traditional IRA to a Roth IRA as a conversion without paying taxes. The tax consequences won’t change, since both the RMD and the conversion balance will be subject to tax. I’m 63. Does it make sense for me to start slowly converting 457 to Roth IRA, spread over say 10 years (to avoid getting into 28% tax bracket)? If however you are age 70.5 or older, you are not eligible to make a traditional IRA contribution. But please check with your tax preparer to make sure. Perhaps more importantly we need to know if we should do it. Considering a Roth IRA conversion comes with immediate tax consequences, there are plenty of scenarios where doing one doesn’t make any sense. Hi Andy – Nope. Somehow I don’t think it will involve getting a refund on the taxes you paid on the Roth contributions. Can I subtract the full $15k historical basis in 2016 against my ROTH conversion amount and just take the benefit this year, or do I have to go back and file amended returns for each of the last two years to use part of the basis in each of those years? I started a Roth IRA 2014 and I currently unemployed & pending disability under the age 59 1/2 . In the absence of this second rule, someone wanting to make an premature distribution from an IRA could do so by converting the money to a Roth and then immediately withdrawing it. Hi Carol – No, you can do a partial conversion (or the whole account if you like). You have to balance that against the benefit you will gain from the conversion. All the traffic is going the other way, as you might imagine. Hi Marc – According to IRA FAQs – Recharacterization of Roth Rollovers and Conversions, “if you recharacterize all or part of a rollover or conversion to a Roth IRA, you cannot reconvert the amount recharacterized to the same or another Roth IRA until the later of a) 30 days after the recharacterization, or the year following the year of the rollover or conversion.”. While Roth IRAs grow tax … I want to convert part of my traditional IRA funds to a Roth IRA. Move the money to a Roth IRA (and put it into some investments). Also, because I made these 2016 contributions and the conversions between Jan 1 2017 and April 18 2017, I don’t think Vanguard will be sending any tax forms to me. I’m wondering if the 1099 references the distribution from the IRA for the conversion, and you’ll get a separate one for the Roth cash out? The broker showed the taxable amount as the face value of the bond (no accrued interest). I have a different rollover situation that I haven’t been able to find clear rules for. Therefor if one of them goes up some day, all of the gains from this point will be tax free? Appreciate your response. Can you convert a traditional IRA to a Roth IRA by April 15, 2016 and have the conversion included in your 2015 tax return (i.e., back date the conversion), or will it have to be reported in your 2016 tax return? There are stocks, mutual funds, CDs and cash in my IRA account. Another tax-saving strategy created by the CARES Act is to do a Roth conversion in tandem with a large charitable contribution. Same if you rolled it over to a traditional IRA first, then converted. The pervasive and incorrect myth of ‘one tax on every dollar” and ‘high tax rates are bad’ is why voters do not understand how they are benefitting the affluent, charging themselves for the shortfall, and without even fathoming that their total income would have to be vastly greater than (say) $250k . Hi Amy – Unless they have special rules for marketplace insurance, a Roth conversion shouldn’t be counted as earned income. It’s a way to supercharge your Roth conversion ladder by minimizing taxes. . Thanks! How is this best handled? I think I can ignore the 401k and 457b balances for tax purposes, but I’m not sure about the SEP Ira? Each strategy is measured by the total after-tax asset value received by heirs upon the owner’s death (assumed to be age 95). 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