Katsmeow
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 11, 2009
- Messages
- 5,308
Roth conversion
Ok I get what you are saying now. Yes, that might work. I need to play with it to see what that does to the international. The only bad thing is having to buy Strategic Income in my 401k since it has a .98 ER. (A couple of years ago Vanguard did a plan for us and at the time they put some of my 401k in the Strategic Income fund so they at at least thought it was the least worst option).
I guess what I could do is do the conversion early in the year and withdraw the converted money throughout the year and leave the earnings from it in there which would ultimately be able to withdrawn tax-free. Is that the reason to do this now?
Edit: Well I'm not sure the above works. This seems to say that if you withdraw in the same year you do the conversion then as to the amount withdrawn it is as if you never converted.
Publication 590 (2012), Individual Retirement Arrangements (IRAs)
Sell the equities as outlined in post 19, that sells the 10% equities. On top of that, buy the Extended Market in the taxable account and sell it in the IRA. Still 10% equities sold, and the taxable account remains all equities.
Ok I get what you are saying now. Yes, that might work. I need to play with it to see what that does to the international. The only bad thing is having to buy Strategic Income in my 401k since it has a .98 ER. (A couple of years ago Vanguard did a plan for us and at the time they put some of my 401k in the Strategic Income fund so they at at least thought it was the least worst option).
I get that. Why I haven't done it is that I didn't see much point in doing a conversion if I was just going to turn around and immediately withdraw the converted money.Doing the Roth conversion cost you nothing if you are going to withdraw that amount from the IRA anyway. You pay 28% taxes if you withdraw from the IRA. You pay the same 28% taxes by characterizing that withdrawal as a Roth conversion. It's the same taxes either way, you're just calling it a Roth conversion instead of a withdrawal (and shifting the money around a bit differently). Effectively a no cost transfer from your taxable account to a Roth account.
I guess what I could do is do the conversion early in the year and withdraw the converted money throughout the year and leave the earnings from it in there which would ultimately be able to withdrawn tax-free. Is that the reason to do this now?
Edit: Well I'm not sure the above works. This seems to say that if you withdraw in the same year you do the conversion then as to the amount withdrawn it is as if you never converted.
If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions.
Publication 590 (2012), Individual Retirement Arrangements (IRAs)
Last edited: