Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Conversion of Traditional IRA to Roth Steps.
Old 10-07-2006, 08:07 AM   #1
Full time employment: Posting here.
 
Join Date: Oct 2002
Posts: 717
Conversion of Traditional IRA to Roth Steps.

I'm in the process of constructing a conversion of traditional IRA funds
and 401K rollover IRA funds to a Roth IRA account. I know this subject
has been touched upon a number of times here, but I am having trouble
finding a good collection of information using the search feature.

Can anyone point me to a thread or detail here the sequence of steps
involved in the process. My interest is in converting the maximum
amount I can at my existing tax bracket which should be considerably
lower than prior to my wife's and my retirement. I'm planning on
doing this year after year to try and reduce the funds in the
traditional IRA's. Any tips or tricks would be appreciated.


My guess is that I need to estimate our income for the year and run
it through a tax program (would I use last year's program?) and
then see how much more income I could add before the next tax bracket
kicked in. Other questions come to mind, such as can the conversion
take place up until April 15 of the next year similar to the
contribution deadline?
__________________

__________________
Random Reinforcement is Highly Addictive.
riskadverse is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Conversion of Traditional IRA to Roth Steps.
Old 10-07-2006, 08:29 AM   #2
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Re: Conversion of Traditional IRA to Roth Steps.

http://www.irs.gov/publications/p590/index.html is the IRS publication.

The best discussion and instructions I have seen is on the Fairmark site at http://www.fairmark.com/rothira/decide.htm

You need to do your conversion before year end. But, if you miscalculate, you can undo it (recharacterize) up until the time your return is due.

Nords and others are in the process of doing regular conversions and may have some tips.
__________________

__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: Conversion of Traditional IRA to Roth Steps.
Old 10-07-2006, 08:29 AM   #3
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
Re: Conversion of Traditional IRA to Roth Steps.

Goto TAXACT.COM and download the FREE program. It is 2006 version and you can run though you projected income for 2006 on it.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Re: Conversion of Traditional IRA to Roth Steps.
Old 10-07-2006, 08:41 AM   #4
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Re: Conversion of Traditional IRA to Roth Steps.

Oh, and IRS form 8606 and instructions will be your friend.

http://www.irs.ustreas.gov/pub/irs-pdf/i8606.pdf
http://www.irs.ustreas.gov/pub/irs-pdf/f8606.pdf
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: Conversion of Traditional IRA to Roth Steps.
Old 10-07-2006, 09:37 PM   #5
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: Conversion of Traditional IRA to Roth Steps.

Quote:
Originally Posted by Martha
What Martha said, and try these:

http://early-retirement.org/forums/i...31385#msg31385
http://early-retirement.org/forums/i...5818#msg165818
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Conversion of Traditional IRA to Roth Steps.
Old 10-08-2006, 09:20 AM   #6
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,149
Re: Conversion of Traditional IRA to Roth Steps.

Here is an article with answers to commonly asked Roth IRA questions, including this one:

Q. If I convert my IRA to a Roth IRA, will that income increase my adjusted gross income for the current year?

A. Absolutely. The income you have to report for an IRA conversion to a Roth IRA will have an impact on all tax issues that are based on AGI -- except for any direct Roth contribution and/or conversion issues. In other words, if you meet the AGI limitation rules to convert or contribute to a Roth before taking the conversion income into consideration, this income won't make you ineligible based on an increased AGI. But any tax provisions that use AGI as a guidepost will be affected -- including medical expenses (7.5% AGI floor), miscellaneous deductions (2% AGI floor), taxability of Social Security (based on AGI), passive loss limitations (based on AGI), and many others.


If I understand this corrrectly, it looks like if your primary source of income is IRA withdrawals or other taxable income, the window of opportunity for Roth conversions could close at whatever time you decide to start taking SS...

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Re: Conversion of Traditional IRA to Roth Steps.
Old 10-08-2006, 09:44 AM   #7
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: Conversion of Traditional IRA to Roth Steps.

Quote:
Originally Posted by REWahoo!
If I understand this corrrectly, it looks like if your primary source of income is IRA withdrawals or other taxable income, the window of opportunity for Roth conversions could close at whatever time you decide to start taking SS...
Ooh yeah. It's that window that opens when your paychecks stop. It might even be a valid consideration for delaying SS.

We've also noticed that a Roth conversion can screw up a good college-aid FAFSA by driving AGI artificially high. The financial aid people just look at the AGI, not all the sophisticated tax planning that accounts for it. So we're going to skip a couple conversions in 2008 & 2009 to make sure that we don't mess anything up before the kid's 2010 matriculation.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Reply

Tags
ira


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Converting Traditional IRA to Roth IRA piranha Young Dreamers 4 04-14-2007 08:39 AM
Traditional IRA to Roth Conversion Question Dog FIRE and Money 5 03-10-2007 10:53 PM
Contributing to Roth IRA and Traditional IRA mrinvest Young Dreamers 18 11-22-2006 11:45 AM
Not eligible for Roth IRA - conversion? Lusitan FIRE and Money 9 02-23-2006 11:00 AM
Traditional IRA to ROTH conversion charlie FIRE and Money 8 02-13-2006 06:52 PM

 

 
All times are GMT -6. The time now is 03:12 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.