Author Topic: Roth Rollover  (Read 3006 times)

mikefixac

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Roth Rollover
« on: March 26, 2013, 10:09:52 PM »
When retire, my wife can roll over her defined contribution plan into a Roth.

Let's say there's $100K in the defined contribution plan. Can she put the whole $100K into a Roth and then use her taxable savings account to pay the taxes on the Roth?

And here's one more question please. If the answer is "yes" to this, does my wife have to wait 5 years before she can then draw out the monies she put in the Roth account? She's 50.

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Re: Roth Rollover
« Reply #1 on: March 27, 2013, 12:05:05 AM »
Mike, I would call Vanguard they offer free advice. There are several calculators on the web that I just used recently to figure out whether rolling over my traditional IRA into a Roth would be worth the $8,000 tax.

My situation is different due to age and withdrawal year. I have many many years to go before officially qualifying at 59 1/2 withdrawal age. I calculated the difference and it will save me over $40,000 to convert to Roth vs. keeping it traditional, even though initially I have to pay taxes on the conversion. But in your case, already at 50, it may not be in your favor to pay the extra taxes.

the fixer

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Re: Roth Rollover
« Reply #2 on: March 27, 2013, 07:57:32 AM »
The answer to both questions is yes.

When you do a Roth conversion you can elect not to withhold taxes. You would then be responsible for paying them separately (either when you file your return or through estimated tax). With such a large conversion, though, you'd have to be careful not to end up owing a penalty at the end of the year for not paying enough estimated tax.

A better option may be to spread the conversion over 2-3 years, converting a portion of the total each year. You'll probably pay less in taxes because of our progressive tax system.

Conversion amounts cannot be withdrawn until they have been in the Roth for at least 5 years, or a 10% penalty applies. See http://www.bogleheads.org/wiki/Roth_IRA under "Treatment of Distributions" 2.2

mikefixac

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Re: Roth Rollover
« Reply #3 on: March 27, 2013, 10:08:43 AM »
Thanks to you guys for responding. Much appreciated.

Will

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Re: Roth Rollover
« Reply #4 on: November 29, 2013, 07:33:35 AM »
I didn't want to start a whole new thread, but haven't really seen this discussed anywhere and can't find the answer on the interweb:

If I were to do a direct transfer/rollover of my Roth (from T. Rowe Price to Vanguard for example), how do I know how much I can withdraw?  Because I know I can always withdraw my contributions before I hit 59.5 but not the gains, but since it all looks like new money how do I know with the new account which are which?

the fixer

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Re: Roth Rollover
« Reply #5 on: November 29, 2013, 10:57:07 AM »
Have you been saving your Forms 5498? Those tell you your history of contributions and conversions. http://www.obliviousinvestor.com/should-i-keep-my-form-5498/

(and so I don't sound like a know-it-all, I wasn't keeping them either until I read that. I have a spreadsheet I use to keep track)

Will

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Re: Roth Rollover
« Reply #6 on: November 29, 2013, 07:08:05 PM »
Have you been saving your Forms 5498? Those tell you your history of contributions and conversions. http://www.obliviousinvestor.com/should-i-keep-my-form-5498/

(and so I don't sound like a know-it-all, I wasn't keeping them either until I read that. I have a spreadsheet I use to keep track)

Aha!  Thank you for this!  I bet I could probably download those (or otherwise get them) from TRP.