Mechanics of a Roth Conversion

[omni550]

Need Roth conversion help, please.

After crunching my numbers thru 2018 Turbo Tax, I'm planning on doing a tIRA to Roth conversion today.

What are the mechanics?

On Vanguard, it sounds like you simply find the order screen and convert?

On Fidelity, it sounds like it's easier if execute order during the 2-hour window after market close? Per swakybaby on a recent thread: If you place the conversion order after the market closes for the day but no later than 2 hours after the market closes, you will know the exact share price and it’s clearly indicated in your Fidelity order screen. If you divide the desired dollar amount by the share price, you get the exact number of shares to convert. There’s no guesswork required.

omni

 

[bingybear]

I'm not sure if you really need the two hour window unless you are using MF as they are priced at the end of the day. This year fido's system failed to do my conversion and had me call a number. The rep did my move for me.

So what you are trying to move from TIRA to Roth? $, MF ,stocks, bonds , ETF, CEF? And how are you planning to pay taxes?

edit - I did cash at fido and CEF as schwab this year. I had the exact amount at both places as when the move was done. At schwab that was while I was on the phone. Fido took a little longer likely because the value was fixed.

last year I moved assets at fido. The exact value did not take long to determine.

 

[Dtail]

I converted recently using Fidelity. It was a smooth process. Didn't need a rep.
The only catch is I didn't know the exact amount until the end of the day, but wasn't trying to get it to a specific dollar vs. a small value range.

 

[bingybear]

one other thing is make sure the tax withholding is as you want it. Default is they will withhold 10% I think unless you tell them otherwise.

 

[omni550]

I'm not sure if you really need the two hour window unless you are using MF as they are priced at the end of the day. This year fido's system failed to do my conversion and had me call a number. The rep did my move for me.

So what you are trying to move from TIRA to Roth? $, MF ,stocks, bonds , ETF, CEF? And how are you planning to pay taxes?

I'm just trying to move "in kind" mutual funds.

I have funds at both Vanguard or Fidelity that I can transfer.

(Taxes will be from tIRA, as I have used-up most of my taxed funds in the 12 years I've been retired. This conversion is simply to get some tIRA monies moved to Roth before the tax torpedo of RMDs and SS@70 hits me as a single person.)

omni

 

[bingybear]

either search for the roth conversion tool @ fido if you want to do it yourself or call them and just get it done that way. I ASSUME that you conversion will be based on closing price the day you do the conversion because I've not done conversions with MF.

 

[omni550]

Thanks for the responses. I was able to effect the Roth conversion at Vanguard with no issues.

omni

 

[SecondCor521]

If you did the Roth conversion today at Vanguard it will be based on the number of shares times today's closing price. You'll be able to see the transaction tomorrow I think.

And of course, you'll get a 1099-R from Vanguard in late January I think. The taxable amount will go on Form 8606 Part II and then line 4b of the new 1040.

 

[Sunset]

Just so other readers are informed.

Some places require you to fax or mail in a paper document as they want the signature.

 

[Telly]

Just so other readers are informed.

Some places require you to fax or mail in a paper document as they want the signature.

Yup. Filled in the form online, printed it out, signed it, and faxed mine in Wednesday morning. They won't accept an Adobe whatever electronic signature on the form. Fine with me. This is usually the only time of year that the fax section of our laserjet printer/scanner/fax gets used. Which is just often enough for me to remember HOW to use it,for the rare other times.

 

[NW-Bound]

Roth conversion between two of my accounts at Schwab was done with in-kind transfer of shares of ETFs and stocks. Just click to select, and the shares instantly jumped from one account to the other when I hit "confirm".

The basis reported to the IRS is based on real-time market values of the shares right at the moment I hit "confirm", the same way as buying or selling stocks with a market order.

 

[omni550]

I just double-checked my Vanguard account. The Roth conversion "in kind' between two of my accounts went through without a hitch.

omni

 

[SecondCor521]

The basis reported to the IRS is based on real-time market values of the shares right at the moment I hit "confirm", the same way as buying or selling stocks with a market order.

I believe you, but I'm a little surprised they do it that way. In other similar situations, I've seen the volume-weighted price that day, or the average of the high and the low used.

 

[NW-Bound]

Apparently, the IRS accepts all of the above pricing methods. I like the "instant pricing" method, because I know what the price is to a few pennies when I hit "confirm".

 

[Smitty700]

one other thing is make sure the tax withholding is as you want it. Default is they will withhold 10% I think unless you tell them otherwise.

With Vanguard, doing the conversion online did not give any option to withhold. If you wish to have amounts withhold, you must call to do the conversion.

 

[omni550]

With Vanguard, doing the conversion online did not give any option to withhold. If you wish to have amounts withhold, you must call to do the conversion.

Not my experience^.

When I did my conversion at Vanguard yesterday, it took me to a screen where they automatically chose 10% withholding. And then it gave me the option to change it or not.

omni

 

[Alan]

Not my experience^.

When I did my conversion at Vanguard yesterday, it took me to a screen where they automatically chose 10% withholding. And then it gave me the option to change it or not.

omn

Same here when I did my conversion at Vanguard this month.

 

[RunningBum]

Same here when I did my conversion at Vanguard this month.

Really? I saw an option to withhold, with default of 10%. As I progressed through the process, that option went away (grayed out), and I got that message that withholding was unavailable and I'd have to call if I wanted that done. Maybe we have something set up differently in our accounts.

Could it possibly be that we switched over to the brokerage accounts, and those of you that are able to withhold have not?

 

[mountainsoft]

With Vanguard, doing the conversion online did not give any option to withhold. If you wish to have amounts withhold, you must call to do the conversion.

I started a Roth account at Vanguard in November by converting 10K from my traditional IRA. Like you I did not see any option to withhold taxes (I seem to recall a message saying taxes could not be withheld?). In my case, it was close to the end of the year so I'll just pay the tax on my upcoming tax return. Otherwise I would probably just pay some estimated tax on the EFTPS web site.

 

[Ronstar]

Not my experience^.

When I did my conversion at Vanguard yesterday, it took me to a screen where they automatically chose 10% withholding. And then it gave me the option to change it or not.

omni

Did you have your Roth previously set up, or did you set up your Roth and do the conversion in one swoop? I’m interested in doing a Roth conversion today if I can set up the Roth and convert easily online today.

 

[Alan]

Really? I saw an option to withhold, with default of 10%. As I progressed through the process, that option went away (grayed out), and I got that message that withholding was unavailable and I'd have to call if I wanted that done. Maybe we have something set up differently in our accounts.

Could it possibly be that we switched over to the brokerage accounts, and those of you that are able to withhold have not?

I never withhold so maybe if I had attempted to withhold it would not let me. I just went ahead with another conversion (which I cancelled before completion) and I see that you are correct. Sorry about that.

 

[Alan]

I never withhold so maybe if I had attempted to withhold it would not let me. I just went ahead with another conversion (which I cancelled before completion) and I see that you are correct. Sorry about that.

Here is the screen I see. I don't even get the option to select a withholding.

 

[Ronstar]

Here is the screen I see. I don't even get the option to select a withholding.

Just set up a Vanguard roth account and exchanged funds from my tIRA to the Roth. Very easy. I get the same screen that Alan does when it comes to tax withholding.

 

[Cobra9777]

I'll be doing my 2018 Roth conversion tomorrow (Mon, 12/31). In preparation today, I'll be finalizing all my spreadsheets with year-end distribution amounts. As usual, the only unknown at this point is the exact amount of FTC associated with international equity. So I'll estimate that based on prior years.

At Fidelity, the mechanics are fairly straightforward. It's a simple in-kind transfer of some ETF shares (VTI) from my tIRA to the Roth. I like to get as close as possible to the top of the 12% bracket, without going over. So, after determining the dollar amount I want to convert, I wait until just after the market closes, calculate the number of shares to transfer (based on closing price), and do the transfer with no tax withholding selected. I'll pay estimated tax on Jan 15.

Fidelity reps have told me that all Roth conversions for the day are processed at the closing price using a batch process that is kicked off about 2-3 hours after market close. They've always told me to get it in within 2 hours of close to be safe. This would be a little easier with mutual funds since I could just specify the dollar amount. But we only own ETFs, mainly to avoid big year-end CG distributions.

 

[Ronstar]

Fidelity reps have told me that all Roth conversions for the day are processed at the closing price using a batch process that is kicked off about 2-3 hours after market close.

I think Vanguard does something similar. My exchange of this morning will not be transacted until COB Monday. And at Vanguard, it is based on number of shares, not dollar amount. So the closing price is needed to compute the amount exchanged.