Originally Posted by COZICAN
Silly question but I can't find a solid answer on the weekend. DW and I each have tIRA's. Can we convert from each (up to just below the 22% bracket) to Roth at once or are we still limited to the $7000 yearly contribution?
The $7000 contribution limits only apply to new contributions. That's $7000 for you and $7000 for your wife, assuming you're both over age 50.
You can convert as much as you want from your traditional to Roth IRA's. You'll just have to pay taxes on the amount you convert. You could convert it all at once if you wished, but that would bump your income into the higher tax brackets. So, you'll probably want to keep the total conversion amount, plus any other income you have, under the limit of your current tax bracket. For example, you might convert 10K from yours and 10K from hers, or you could convert 20K from just one account.
We're in the 12% bracket which maxes at $78,950 when filing jointly. We earn about 55K per year, so I converted about 20K of my traditional IRA earlier this year. Then I paid about $2400 in estimated taxes from my savings account to cover any possible taxes and avoid any penalties. I will probably repeat this process for another 3-4 years.
If you go over the bracket limit slightly, it's not the end of the world. You'll just pay higher taxes on the part that is above the bracket limit.
I also redirected all new contributions to our new Roth accounts. Of course, that means you can't deduct the contributions on your tax return anymore.