Actually, mail zero checks. When I realized I was retired and no longer be eligible to contribute to a 401K, I converted my 401K's to Fidelity IRA. I already had a small Fidelity ROTH IRA. Later I convert tIRA to ROTH. I figure out how much I want to convert for the year. I then increase my federal and state withholding on my pension check using my previous year effective tax rate. No checks. Taxes paid monthly in relation to monthly ROTH conversions. I do it this way now incase DW doesn't retire on schedule in May/June. If she doesn't retire, I'll have to slow down conversions to not go into higher tax bracket. I could keep the withholding $ longer to maximize interest in MM but I like simplicity. The only issue I'm having is Fidelity will not accommodate a recurring monthly conversion to ROTH. I have to initiate 12 separate conversions.
First Roth Conversion (Fidelity)
- Thread starter imjustawarrior
- Start date
stepford
Thinks s/he gets paid by the post
For smaller Roth conversions I too had used G Pop's method of changing pension withholding to pay the resulting tax. Now that I'm doing some larger conversions at year's end, however, my pension isn't large enough to accommodate this so I'm having to sign up for Direct Pay.
OP
OP
imjustawarrior
Thinks s/he gets paid by the post
If you are paying taxes from taxable account, you may want to look at this to avoid Direct Pay.
Withholding from Roth Conversion
This is my first attempt at ROTH conversions. I'm starting the year slowly because I'm not sure if DW will continue to work past May/June timeframe. If she does, then I will discontinue conversions. If she stops then I may do a full year lump sum to reach top of current tax bracket. I also want to verify that no matter when or how often I convert, additional taxes withheld monthly from my pension check will be sufficient. I've read conflicting answers on taxes. For example, say your conversion is in January but you don't withhold/pay the taxes until December you will owe a penalty to the IRS.
Morgan22
Recycles dryer sheets
Can anyone confirm if Fidelity can withhold specific dollar amounts for fed and state taxes, or do you have to withhold in percentages only?
YellowSubmarine
Thinks s/he gets paid by the post
Yes get it done. I know of several cases where a conversion was set into motion but it did not register for the current tax year. Don't wait until the last days of the year. SH Happens
OP
OP
imjustawarrior
Thinks s/he gets paid by the post
I did it back in November. I started on a Tuesday and was all done on Thursday.
1. Opened rollover IRA
2. 401k to IRA partial rollover
3. Roth conversion with taxes withheld
4. 60 day rollover into Roth from taxable to replace taxes withheld
Steeler75
Recycles dryer sheets
Just completed a Roth conversion last week with Fidelity. They can work it around to get very close to a dollar amount you want via percentages. But be careful as the rep I worked with took advice from someone not on the call and started my conversation by stating there were to be 3 separate transactions: one for Fed taxes, one for State taxes and then one for the money going to Roth.
I had previously explained that I wanted to have a $48k conversion with, $24k to fed and $14k to State with $10k going to Roth. I also advised I was planning to do a 60 day rollover in January to backfill the Roth for the tax payments from my brokerage account.
I questioned his actions as it would only reflect a $10k conversion. He double checked with someone else and advised he made a mistake and changed the approach to the transaction of $48k, with the associated deductions, allowing me the ability to do the 60 day rollover.
Question: is there any requirement for the 60 day rollover to be completed in the same calendar year or just within 60 days?
Thx
Last edited:
- Joined
- Oct 13, 2010
- Messages
- 12,995
One year, when I took a withdrawal (not Fidelity) and put in a decimal percent withholding (for state) and they rounded up to the next whole number. Then this year I put 3% and they said 4% minimum but I could select 0%.What!?! Ok zero then! I can go online and pay with a credit card (2% fee, but I get 2% kick back, so it's a wash).
I have had my NC paper return "lost" twice when I was due a refund. I had to print it and send it a second time. Always processed quickly when I had to enclose a check, so I always target owing some smallish amount.
I have had my NC paper return "lost" twice when I was due a refund. I had to print it and send it a second time. Always processed quickly when I had to enclose a check, so I always target owing some smallish amount.
TheWizard
Thinks s/he gets paid by the post
If you have the funds in your tIRA at the same brokerage as your Roth IRA, it helps.
I'll be doing an "in-kind" Roth conversion of X shares of one of the ETFs in my tIRA in the coming week. I'll push the button to do the conversion around 3:45 pm ET and it will be essentially complete 15 minutes later.
I don't muck around with that 60 day business for paying taxes on the conversion. I'll do a 4th quarter estimated payment for taxes from my checking account...
OP
OP
imjustawarrior
Thinks s/he gets paid by the post
All my stuff is at Fidelity. That made everything fast and easy. The 401k rollover takes time because they have to sell after close then move the money.
Great information, thanks for the detailed writeup! I am in a similar situation, younger than 59 1/2, with my workplace (that I retired from at 55) 401K and Roth 401K all at Fidelity. I am wanting to rollover $100K to a Roth this year and avoid the 10% early withdrawal penalty. I rolled over a partial amount last week into a Rollover IRA and Roth IRA. Now I want to rollover the Rollover IRA to the Roth IRA, but I'm not sure if the 10% penalty will apply. I called Fidelity today and got mixed responses. I can withdraw from my company 401K without the penalty, but now that it's in a separate Rollover IRA, I'm not confident if the penalty exclusion still applies since it's no longer in my workplace account. I plan to call back tomorrow hoping to get someone that sounds more confident. What part of your process ensures that there is no penalty? Like you, I want to have taxes withheld. I plan to ask tomorrow if rolling over directly from my workplace 401K (since I can withdraw from it without penalty) would be a cleaner process. Any insight you might have to clear up my confusion, would be appreciated. I want to go in with as much knowledge as possible. Thanks again for this thread!
OP
OP
imjustawarrior
Thinks s/he gets paid by the post
I suggest you try to use the proper terminology. This helps prevent confusion when speaking with customer service or others.
You can rollover all or partial from your 401k to a rollover IRA with no penalty. You can then do a Roth conversion from the IRA to a Roth with no penalty. You can have taxes withheld from the Roth conversion. If you do not get the amount of taxes into your Roth, you will have to pay a penalty on the amount withheld for taxes. That is why the 60 day rollover is important. It gets all of the money from the IRA to the Roth. This avoids the penalty.
I am less than 59.5. Post #55 has the steps I followed.
Thanks for the response, I think I understand now.
CalBird
Full time employment: Posting here.
You got the benefit of paying tax at the end of the year without pay penalty of late tax payment even you own tax early in the year.
Sanstar
Full time employment: Posting here.
Our plan for Roth conversions is to use any leftover post tax savings from 2025 to cover taxes on first quarter 2026 conversion. The amount we convert will depend on our estimated tax bracket and how much we have available to spend.
We are both retired, DH is subject to RMD’s and I w/d 4% of end of prior tIRA. Combined total is about $150K before taxes. Our pensions cover operations so this money is used for travel and other big ticket items.
Roth conversions are a slow go; 100% US equities and I don’t count it in my 4% w/d. Hope to leave Roth to kids. All our retirement funds are with FIDO. We’ll file first quarter taxes.
We are both retired, DH is subject to RMD’s and I w/d 4% of end of prior tIRA. Combined total is about $150K before taxes. Our pensions cover operations so this money is used for travel and other big ticket items.
Roth conversions are a slow go; 100% US equities and I don’t count it in my 4% w/d. Hope to leave Roth to kids. All our retirement funds are with FIDO. We’ll file first quarter taxes.
Morgan22
Recycles dryer sheets
@imjustawarrior What does your 1099-R look like? Are the amounts in box 1 and box 2a the same? (And equal to your total rollover amount?) Also, is the distribution code in box 7 supposed to be 2? Or a different number?
If you filed your taxes already, was it easy enough to run it through the software as is? Or did you have to override any forms to make it worked properly so you weren't hit with a penalty? Thanks!
If you filed your taxes already, was it easy enough to run it through the software as is? Or did you have to override any forms to make it worked properly so you weren't hit with a penalty? Thanks!
This YouTube video shows you what the 1099-R looks like and how to enter the information in TurboTax. This will be useful to me next year as I plan to rollover my 401k to a Fidelity Rollover IRA this year.
Similar threads
- pb4uski
- FIRE and Money
- Replies: 10
- Views: 751
- crncrk
- FIRE and Money
- Replies: 16
- Views: 2K
