Funding Roth IRA from Taxable Brokerage

[Austin704]

Thanks for your time and responses. Happy Thanksgiving!

 

[U1964]

I've made Roth contributions at Schwab from this settlement account many times. Most recently a few days ago. It's a straightforward process online:
1) From the "Move Money" menu select "Online Transfer"
2) Select the From and To accounts.
3) If the To account is a Roth IRA it will display current and previous year contributions and ask for the tax year to apply for this transfer
4) Supply tax year, amount, transfer frequency, and transfer date
5) Funds show up immediately in the Roth

Forgot to mention:
Roth conversions at Schwab follow the same procedure and allow the transfer of positions. When the appropriate accounts are selected, Schwab recognizes that this will be a Roth conversion and gives the allowed options (cash, position, cash+position). It gives lots of warnings about the taxes and one can set withholdings.

 

[target2019]

Yes, it's the default fund that Schwab uses when money is moved to or from the account or when funds are liquidated.

Some call it the sweep, and it is cash in my taxable brokerage. I'm not aware of a way to auto-invest that into a money market fund.

I'm also interpreting that your sister is transferring money to the sweep from her checking maybe, where her paycheck goes.

What she's doing is reasonable, and does not result in transactions that disprove that the Roth contributions come from earned income.

If she had 1 million in the brokerage, and the sweep was just cap gains and dividends, then it might be something of concern. But I highly doubt that in the future any of that would become an actual problem if she has the income to support the contributions. Some will disagree with that statement, I'm sure.

 

[pb4uski]

That was correct. It sounds like contribution needs to be cash as mentioned by SecondCor521 above.

+1 Though it is odd that Roth conversions can be made in kind but that Roth contributions must be in cash. Cie la vie.