Roth Conversion/Recharacterization strategy finally sunk in

[Trooper]

I believe the Treasury Regulation you referenced (1.408A-6, Q&A-5(c)) deals with taking distributions from a ROTH before 59.5. Since you will be over 59.5 when you start taking distributions from your ROTH that wouldn't apply.

Thanks zinger1457. I now believe that's the case.

One of the beauties of the kawill table is that somebody else has worried about it and has distilled the wisdom into a few words....compare that to the article you are citing which has several orders of magnitude (or more) words more and it still doesn't cover taxable vs. non-taxable conversion plus more words = more opportunity for confusing those trying to learn. Try creating such a table or flow chart sometime and you will appreciate the skill/knowledge involved in creating something of few words but much wisdom.

Agree!

You now only have to worry about whether your oldest Roth is 5 yrs old or not.
Man on the street would say no since 5 yrs from Nov 2016 is Nov 2021. However due to the peculiar thinking of the creators (you may wish to verify),
the month goes back to January of the yr you created it. .......so , yes, in Jan 2021 no more taxes/penalty on any withdrawals......that is the last section of the chart applies and all distributions are qualified.

Agree about the month gong back to January, based on other research. Thanks.

Note that the clock changes from a conversion clock on each conversion in the first half of the chart (age < 59.5) to a single clock on age of oldest Roth in the second half of chart (age > 59/5).

Precisely. Thanks again.

 

[Fedup]

+1 I convert an amount that I think will be more than what I need in December. When I finalize my return in February or March, I determine how much we are over the top of the 15% tax bracket and recharacterize that amount. I enter the amount that was NOT recharacterized on line C3 of the 1099-R that I received for the conversion, which effectively reduces the conversion to the amount that I input (with the recharacterization being the difference). Then I do a final check that the taxable income is exactly equal to the top of the 15% tax bracket (the target in my case) and file my return. I also wait until the recharacterization is processed before filing my return.

The following year I get a 1099-R that has the amount that was recharacterized in box 1 and a R code (for recharacterization) in box 7 and put that in my subsequent year's return. Because of the R code it does not actually get included in the subsequent year return... in fact, if I didn't input it it probably would not affect the subsequent year return but it comes in automatically when I download from Vanguard.

Thanks for the detail explanation. But I just looked at our 1009-R, I didn't see line C3. Is there more than one type of 1009-R? Mine was a pension and a trustee to trustee transfer. Or did I overlooked something.

 

[pb4uski]

Thanks for the detail explanation. But I just looked at our 1009-R, I didn't see line C3. Is there more than one type of 1009-R? Mine was a pension and a trustee to trustee transfer. Or did I overlooked something.

I should have been clearer... the line C3 is on the 1099-R Form in TurboTax that allows user input.... not on the 1099-R form that I receive.

 

[Fedup]

I should have been clearer... the line C3 is on the 1099-R Form in TurboTax that allows user input.... not on the 1099-R form that I receive.

So you created a 1099-R? It's still not clear to me. I know Turbotax has an option to create a 1099-R.

 

[pb4uski]

In my case a 1099-R is imported from Vanguard, but I could have created one as well. In the TT form, the top section has the same info as the 1099-R but below that there are other sections for user provided information, including the line C3 that I mentioned. I use forms mode in TT.