Hi, I’ve recently retired and would like to start rolling funds out of my traditional IRA to a Roth. If so, what amounts exactly are subject to penalty or taxation? I also have a non-deductible Traditional IRA with T Rowe Price (TRP) which I would like to convert in its entirety to T Rowe Price Roth IRA. No sense paying the penalty if you don’t have to. Hi Andy – Nope. Hi Lawrence – $72,000 goes into the Roth IRA. However, you should also check out top Roth IRA providers like Betterment, LendingClub, and Vanguard. I recently learned that I was being laid off, and will recieve a lump sum severance of $50k, which I will rollover to an IRA. I’m paying premature distribution income + penalty on the $5k distribution. I currently contribute the maximum of $5500 per year to my Roth IRA. Sit down with your tax preparer/CPA to map that out. One spouse has retired, the other is still working. $700,000 in a Roth 401K $250,000 in taxable accounts $170,000 in Roth IRA’s Other folks will have far less or far more, but the principle is the same. Check with your tax preparer to be sure. Unfortunately, I deposited the $5,500 for 2016 tax year into the Roth account about 9 months ago and am now trying to undo it prior to the April 18 deadline. If the market does go up after you make a Roth IRA conversion, you will in effect be getting your Roth IRA at bargain rates. This year I am a full time employee. Jan 5, 2017 – make a $5k non-deductible contribution to IRA account. My employer does not contribute any to this plan, so I am trying to figure out the exact rules for converting while still employed. Thanks so much! I also have a company 401K & pension (100% pretax contribution). Meet Joyce. I understand that the 5-year clock is considered to begin on January 1 of the year of the conversion. But if you do an indirect transfer (money first goes to you personally, then you transfer it to the Roth trustee within 60 days) the first IRA trustee may withhold 10% or more of the amount transferred. My suggestion is to do them for as long as the IRS is allowing them to happen. You might want to ask your CPA about it. I also have a ROTH IRA with Fidelity. For example, can I transfer funds from a Roth account that has already satisfied the 5-year rule to supplement a Roth that has not satisfied the 5-year rule? Hi Sherry – Technically speaking, you’re supposed to make the estimates in the quarter when the income is received. And many investors will consider it worthwhile to pay them now in order to get the tax-free future growth, tax-free withdrawals, … Roth IRAs don’t come with Required Minimum Distributions (RMDs) at age 72 … Hi Dan – There are no lifetime limits, only a limit of one conversion per year. Please confirm (with an IRS reference) that there is a 5-year clock for each year a Traditional-to-Roth conversion is completed. Would you recommend trad IRA or creating a traditional and then converting to Roth ? I just found this out – I was under the impression for the past 12 years that my IRA was still a Roth IRA. I hope to be retired by 58. Paying 12% tax today on a Roth conversion beats paying 22% later when you have to start taking RMDs. Is that right? I am 52, and I plan to retire at 55. A retirement plan is yours only. As long as she has earned income, she can make a contribution up to the amount earned. – Todd, Hi Todd – I’ll try to address each question one at a time…. Thank you. I have both a traditional and Roth IRA. The dearth of taxable income in early retirement suggests that a Roth conversion strategy during those years can add substantial value. The only saving for retirement we have is 401k which we are both maxing out. Once you convert, there’s no going back. So what you can do is make a non-tax-deductible traditional IRA contribution, and then convert the amount of the contribution to a Roth IRA. Hi Chris – You should be good to go. I’d like to convert $10,000 from a Traditional Ira to a Roth in 2016. With that in mind, here are some important Roth IRA conversion rules you need to learn and understand: While the most common Roth IRA conversion is one from a traditional IRA, you can convert other accounts to a Roth IRA. That would practically kill the Roth and everyone sitting on large IRAs (or pre-tax 401k plans) would be laughing all the way to the bank. Hello Jeff, in March of 2015 I opened a Traditional IRA account using after-tax dollars and soon after decided that was a mistake and converted the Traditional IRA into a Roth IRA. You will have to pay tax on any earnings on the non-deductible portion. Secondly, I realize that I can’t contribute to a traditional IRA next year, can I roll over money from a 401K or 403B to a non-job related IRA and then do a backdoor conversion from that to my non-job related ROth. I’d contact the IRA trustee and see what they recommend. There shouldn’t be a problem rolling the 401k over into a traditional IRA. Hello Jeff, Me again, I think I have got the gist of the situation here: http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs-Recharacterization-of-Roth-Rollovers-and-Conversions Feel free to address or delete my other post as you see fit. IRA contributions must be made from earned income. I have a curveball question for you. Thanks. Where you’ll run into problems is doing the Roth conversion from the 2016 recharacterization and a new conversion for 2017. But you can still do another conversion in 2017 since there are no limits on conversionss. 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