Yes, Sonja, you can do both. The only way to spread the tax liability over several years is to work the conversion over several years. The one time per year rule is on rollovers of a traditional IRA to another traditional IRA. If you have to use funds from your traditional IRA in order to pay the taxes it will cost you to convert to a Roth, you're better off letting the funds sit tight. There can be another wrinkle. Assuming that our Social Security and rental income is non taxable, what tax bracket would a 150k IRA roll over to a Roth IRA be subject to? Is there a way, for simplicity sake later, to rollover my ROTH IRAs (both mine and my wife’s) into my ROTH 401k (I can’t rollover anything into my TSP)? There are TWO five-year rules. Thank you. Really like the article. Hi Marc – According to IRA FAQs – Recharacterization of Roth Rollovers and Conversions, “if you recharacterize all or part of a rollover or conversion to a Roth IRA, you cannot reconvert the amount recharacterized to the same or another Roth IRA until the later of a) 30 days after the recharacterization, or the year following the year of the rollover or conversion.”. These include white papers, government data, original reporting, and interviews with industry experts. But you should be aware that you cannot escape taxes by rolling minimum distributions from a traditional IRA to a Roth. That’s because it isn’t earned income and if you want to get technical, it’s not income at all, but a rollover of assets. The stock is doing quite well along with its’ dividend. 2. Also, there is no dollar limit on the amount of the conversion. You already paid income taxes before you contributed, remember? Can this be done? We are now doing our taxes on TurboTax and we filled out and listed those contributions under the Personal>>Deductions & Credits>>Retirement & Investments>>Traditional & Roth IRA Contributions. Hi Dave – Based on your description, there are several things going on here. Is it perhaps just a glitch in his software system? Can I ask a detailed question? Will 401K account accept rollovers from traditional IRA even if non deductible contributions have been made to the Traditional IRA account? So we can only make non-deductible contributions to a IRA. The IRS’s IRA One-Rollover-Per-Year Rule article says the following: Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). Thanx. Thank you for any guidance you can provide. My dilemma is this: -The first two years, I contributed to the Roth employer program. Basically, is prorata chronological or does it look at your average annual basis? What do recommend for someone who’s had a ROTH for several years but now hit the income limitations and can’t contribute any more? I am 75 and employed. Do I have until April 15, 2015 or did I need to do it before 31 Dec 2014? Retirement accounts are strictly individual affairs in the eyes of the IRS, even if you’re married. For the reason that 1. Any funds in a QRP that are eligible to be rolled over can be converted to a Roth IRA. Each week, we’ll send you money tips to guide you on the path to financial freedom. They also gave me a 2014 5498 IRA Contribution for 11,000. But once again, consult a CPA. The tax benefits of a Roth IRA are clear: Tax-free growth potential and tax-free withdrawals in retirement. I understand we can contribute to IRAs after the year has ended but before April 15 of the next year and still have it apply to the prior year. Would you suggest starting traditional IRA’s and converting immediately or build up the Traditional IRA for a while and then convert? Thanks! You say: “But if Bentley’s employer 401(k) plan permits it, he can avoid tax liability on future conversions by rolling his current IRA balances over into the 401(k).”. Look at our current interest rates – no one thought they could stay this far below average for as long as they have. You made a non-deductible traditional IRA contribution for 2016 and you’re doing the conversion in 2017. You roll your Roth IRAs into the Roth 401k IF your employer plan allows you to do it. Stepwise it would look something like this: 1) Max out 401k yearly. (because I also owe tax on the gain?). Hi Georgr – That’s a good plan, paying the tax liability with non-retirement funds. Shouldn’t this example you provide read “Consists entirely of PRE-tax contributions.” ?? Thank you so much Jeff, this is the most helpful source I have yet found anywhere for Roth IRA information. Thanks so much for the great article. Traditional IRA: Consists entirely of after-tax contributions. Since the IRAs were made with after-tax contributions, and there is no investment income, the conversion should go through without any tax consequences. Am I right? I understand that the 5-year clock is considered to begin on January 1 of the year of the conversion. If the conversion is done properly, you will not be subject to a 10% early withdrawal penalty.’. How often can one convert Traditional IRA to Roth IRA in 2015? If you are charitably inclined and have an IRA, you might want to consider doing a Qualified Charitable Distribution (QCD) for 2019. Hi Karen – I believe you can transfer them, but that’s something you should discuss with the Roth IRA trustee. Do that five years in a row beginning at age 50, and you can take tax/penalty free withdrawals for the next five years, up until age 59.5, when you can take withdrawals at will. Jeff, thanks for the very useful article. It shouldn’t be a problem Dave, one is a contribution, the other is a conversion of existing IRA money. I am planning to convert my Traditional IRAs to Roth IRA and tumble to your website while looking for tax info abouth the conversion. (avoiding A) D: Thank you. The CARES Act suspended required distributions from defined contribution plans and IRAs for 2020. Here is the quote: One precondition to doing conversions on which the IRS and all planners agree upon is the following: Only clients who have already converted all their previous IRAs to Roths – an important and frequently overlooked precondition — can take full advantage of the strategy. At one point you say a, ‘Trustee-to-Trustee Transfer. They are: 1. Great article! 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