Author Topic: Should We Convert Our Roths to Traditional IRAs?  (Read 2173 times)

Navin_Johnson

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Should We Convert Our Roths to Traditional IRAs?
« on: December 17, 2014, 12:35:35 PM »
Hello- My wife and I are in our late 20s and have been maxing out our Roths for the last few years. This year, we both received raises and our adjusted gross income for 2014 will be a little over $200k. In doing some research, it looks like we no longer qualify to contribute to our Roths since our AGI is above $191k, right? However, what happens to our 2014 contributions? Will we be penalized? Should we convert our Roths to traditional IRAs? And if so, when?

Thanks in advance!

johnny847

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Re: Should We Convert Our Roths to Traditional IRAs?
« Reply #1 on: December 17, 2014, 12:48:55 PM »
Why would you want to convert a Roth to a traditional IRA? You've already paid the taxes on the contributions. Now you want to gift the IRS by paying taxes on the withdrawals too?? I'm not sure that there is a process of converting a Roth to a traditional to begin with (you can recharacterize contributions, but you can't convert a Roth to a traditional in its entirety).

Yes, you're correct, you no longer qualify to contribute to your Roths. But make sure you're looking at AGI. Not gross income. You say your income will be a little over $200k, but if both of you are contributing the max to 401ks (which you should be at that income, so long as a 401k is offered), then your AGI is going to be a little over $165k.

There are three options for you http://www.rothira.com/blog/what-to-do-if-you-contribute-too-much-to-your-roth-ira

Navin_Johnson

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Re: Should We Convert Our Roths to Traditional IRAs?
« Reply #2 on: December 17, 2014, 01:05:50 PM »
Thanks for the link! Our AGI is correct and we are maxing out our 401ks. Looks like I'll want to recharacterize my contributions for this year. I just didn't realize what my options were. Avoiding any additional taxes is definitely the goal. Thanks!

MDM

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Re: Should We Convert Our Roths to Traditional IRAs?
« Reply #3 on: December 17, 2014, 01:25:35 PM »
Also see http://www.bogleheads.org/wiki/Backdoor_Roth_IRA: "A Backdoor Roth IRA is a technique for contributing to a Roth IRA when your income exceeds the contribution limit."

Chicken

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Re: Should We Convert Our Roths to Traditional IRAs?
« Reply #4 on: December 17, 2014, 03:09:20 PM »
Also see http://www.bogleheads.org/wiki/Backdoor_Roth_IRA: "A Backdoor Roth IRA is a technique for contributing to a Roth IRA when your income exceeds the contribution limit."

If you have a 401k then the income limits are even lower for a pre-tax traditional IRA than a Roth so you can't do that instead.  You can do the Backdoor roth as stated above.

Navin_Johnson

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Re: Should We Convert Our Roths to Traditional IRAs?
« Reply #5 on: December 20, 2014, 09:46:28 PM »
Great- thank you both for the help!