My wife and I (combined) are slightly past the income limits for RothIRA.
So we've started contributing to tIRA - using the same source that we would have used for the RothIRA (i.e. after-tax income, direct deposited after federal withholding from our employers). [ and we're in a state with no income tax ]
Is there essentially no-reason-to-wait on doing this convertion? For both our IRA's they haven't really gained anything yet (both within 1% of what has been contributed).
Also, after 5 years of having the RothIRA account, we can withdrawal what we've put into the RothIRA (we've both had ours over 10 years). I assume this also applies to converted funds and the brokerages involved will handle tracking that? (i.e. if our rIRAs happened to have gained 20% over the past year, we'd be taxed on that during a conversion - and somehow their systems will track that we've had a $7000 "cash contribution" {effectively}?)
Vanguard has a nice "Convert to Roth IRA" button, but I wanted to ask first since I'm getting the impression the Vanguard site is assuming it is all pre-tax source? There was a reference to a "Show by Source" link for Vanguard, but I wasn't able to find it. I've read about the Form 8606 reporting, but that's in us for tax reporting. How does Vanguard know this is after-tax funded? And will it be a 1:1 share-per-share conversion (on what we've already allocated the tIRA to), or do they "sell everything" and put into their default account, and we have to do the allocations again after the conversion? I'll call Vanguard when we get a chance during business hours, but was curious on others experience with the process.
And for that matter, if it's all after-taxed funded, does it make any difference to do the conversion now or in a few years when we're ready for retirement (3-5 years or so)? (aside from the risk that the feds elect to disallow conversions; in which case, just do it annually?)
So we've started contributing to tIRA - using the same source that we would have used for the RothIRA (i.e. after-tax income, direct deposited after federal withholding from our employers). [ and we're in a state with no income tax ]
Is there essentially no-reason-to-wait on doing this convertion? For both our IRA's they haven't really gained anything yet (both within 1% of what has been contributed).
Also, after 5 years of having the RothIRA account, we can withdrawal what we've put into the RothIRA (we've both had ours over 10 years). I assume this also applies to converted funds and the brokerages involved will handle tracking that? (i.e. if our rIRAs happened to have gained 20% over the past year, we'd be taxed on that during a conversion - and somehow their systems will track that we've had a $7000 "cash contribution" {effectively}?)
Vanguard has a nice "Convert to Roth IRA" button, but I wanted to ask first since I'm getting the impression the Vanguard site is assuming it is all pre-tax source? There was a reference to a "Show by Source" link for Vanguard, but I wasn't able to find it. I've read about the Form 8606 reporting, but that's in us for tax reporting. How does Vanguard know this is after-tax funded? And will it be a 1:1 share-per-share conversion (on what we've already allocated the tIRA to), or do they "sell everything" and put into their default account, and we have to do the allocations again after the conversion? I'll call Vanguard when we get a chance during business hours, but was curious on others experience with the process.
And for that matter, if it's all after-taxed funded, does it make any difference to do the conversion now or in a few years when we're ready for retirement (3-5 years or so)? (aside from the risk that the feds elect to disallow conversions; in which case, just do it annually?)