Im going to suggest that you sit down with a CPA and get professional advice. Thank you. Love it. If so, what amounts exactly are subject to penalty or taxation? It won't pay to procrastinate. Youve got a lot going on, and a mistake could be costly. I made non-deductible traditional IRA contributions for 2013 and 2014 in April 2014. On the pro side, converting the account to a Roth will enable you to take the money out tax free later. When you do decide to take distributions from a Roth IRA, you wont have to pay income taxes on that money. Im 63. Steve. In 2022, these limits are $144,000 for single filers and $214,000 for Roth Filing status A Roth conversion is when you transform your traditional IRA or 401(k) into a Roth IRA. Does that make sense? Thats a tough one and what makes the Roth IRA conversion such a difficult decision to make. I am all for diversification though so my question is am I better off continuing to build this traditional Ira and then convert periodically once or twice per year or should I not bother with the Roth at all and just go with the traditional Ira? How the Roth Conversion Ladder Works I am 62 and lost my job last year, Andy may not get back to work. It seems there is sort of a tipping point where the combination of RMDs, pension income, investment income and Social Security income put relatively wealthier folks into higher tax brackets and make more of their Social Security income taxable. I plan to do something similar in 2017. There are plenty of other situations where this move wouldnt make any sense, and you should speak with a tax professional before you move forward either way. Remember, this rule applies to each conversion, so if you do one in 2023 and another in 2024, the latter transfer will need to be held in the account for a year longer to avoid paying a penalty. And, you can review charts to assess your tax liability in the year you do the conversion, the impact on income from RMDs, and more. And be sure to consult with a tax advisor to make sure it makes sense for your specific situation. But make sure you do a trustee-to-trustee rollover to keep it simple. You should be able to Joe, subject to an annual limit of $6,500 (since youre over 59.5). I had no tax consequences on the conversion because I did not receive any benefit from the IRA. If one contributes (or converts) to a Roth while they are in the 39.6% tax bracket and then retires into the 15% tax bracket, they made a poor decision. All Rights Reserved. Roth IRAs In your article, you include the following quote from a Vanguard advisor giving advice on inherited IRAs. I just want to make sure i understand your reply. But again, find out specifically why the direct Roth rollover cant be done. But I think what youre referring to is an outright distribution from the plans, and the pro-rata division. It shouldnt be a problem Dave, one is a contribution, the other is a conversion of existing IRA money. Your income has no bearing on whether you can contribute to a Roth 401k. I initiated a tax year 2016 IRA to Roth conversion with my broker in 2016, but the distribution AND conversion happened in 2017. And living on other assets and SS is fine to say. In Jan 2020 I rolled over from my workplace 401K Fidelity Pre-87 and Post-86 the funds to a Fidelity Rollover IRA (pre-tax) and Roth IRA (after-tax), respectively. I currently have a traditional IRA with a balance of $X, which includes deductible contributions from years previous to 2016. Second, its not likely that you will be able to entirely avoid paying income tax on the conversion.
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