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Old 06-16-2019, 01:55 PM   #21
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No penalty on conversion.

As has been said many times on various threads, the advantage to a Roth conversion is if your tax rate now is lower (or the same) as you expect it will be in the future, factoring in RMDs if you don't convert. You don't give that kind of information for your case so it's impossible for any of us to answer.

Also, don't threadjack. Start your own thread. Your question is different than this thread topic.
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Old 06-16-2019, 01:59 PM   #22
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Originally Posted by vipertom1970 View Post
not mean to highjack this thread but if a person is 50 yo with 1 mill in Tira but does not need the $$ for another 11 years then would you recommend to do a smaller conversation to Roth the next 11 years ? Besides paying taxes will there be a penalty to do a conversion at 50 yo ?

No penalty for doing a conversion at 50. Whether in makes sense to start converting now depends on current and expected future tax brackets. Suggest you use one of the online calculators. Here's one from Schwab:


https://www.schwab.com/public/schwab...ira_conversion
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Old 06-16-2019, 07:53 PM   #23
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Yes, absolutely do conversions as long as you can do them at a lower tax rate than once SS and other retirement income streams start.

No penalty on conversions.
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Old 06-16-2019, 08:56 PM   #24
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Originally Posted by Squirrel View Post
I have never done a Roth conversion, so this might be a basic question for many of you:

How much extra tax paperwork is required when you convert from tIRA to Roth?
If you're doing conversions before age 59.5 and may use a Roth conversion ladder to withdraw converted amounts before age 59.5, you'll want to keep track of the net conversion amounts so you don't pay taxes or penalties on those withdrawals.

This can be done by retaining copies of your Form 8606's from the years in which you do the conversions.

ETA: Withdrawals are deemed (by the IRS) to be from contributions first then conversions, oldest to newest. So if you do this, you'll also want to keep track of your Roth contributions by retaining Form 5498's and/or keeping records from your IRA custodian.
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Old 06-16-2019, 10:04 PM   #25
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If you're doing conversions before age 59.5 and may use a Roth conversion ladder to withdraw converted amounts before age 59.5, you'll want to keep track of the net conversion amounts so you don't pay taxes or penalties on those withdrawals.

This can be done by retaining copies of your Form 8606's from the years in which you do the conversions.

ETA: Withdrawals are deemed (by the IRS) to be from contributions first then conversions, oldest to newest. So if you do this, you'll also want to keep track of your Roth contributions by retaining Form 5498's and/or keeping records from your IRA custodian.
Funny story tonight.

I have a spreadsheet to keep track of exactly this. All my contributions and conversions and when I can access them if needed. I actually forgot I had it until now, and hadn't updated it in 2 years. So I added my 2017 and 2018 conversions, and browsed my history out of curiosity. Hmm, a contribution in 2012? But I retired in 2011! Uh-oh. That's an excess contribution. 6% penalty per year, plus interest. That's $360/yr for 7 years, over $2500, plus interest. I go back and check my VG transaction history online to see if I really made that contribution. I did. Crap. I start googling...maybe you won't get caught, but there's no statute of limitations so the penalty and interest keep adding up. How do I back it out now? Advice seems to be to call the VG IRA dept.

I go get my 2012 tax folder which includes all the end of year stuff VG sent. Yep, there it is again. But wait, here's some other form. A recharacterization of that $6000 a few weeks later, and my handwritten note explaining it. Whew! Apparently I caught it, and quickly backed it out, and even reported the tax on the small amount I made in those 3 weeks. I look at my VG transactions and see where I backed it out there.

That was a nasty hour while I thought I had screwed up. I updated my spreadsheet to zero out that contribution and make a note of the backout recharacterization, so I won't go through this again even if I somehow find that contribution again.

Some people say not to bother saving old tax records beyond 3 years or 5 years. Glad I didn't listen to that!
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