Author Topic: 403 b inheritance- can it go to roth?  (Read 273 times)

mominca

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403 b inheritance- can it go to roth?
« on: March 19, 2020, 12:21:30 PM »
Hi all,

I inherited 25k in a traditional 403b account. I'd like to transfer it to an inherited IRA account at Vanguard (which I haven't set up yet, but I have a traditional IRA there). I think Roth makes the most sense for us right now as we'll be in a lower tax bracket this year by far then I expect us to be in coming years. Can I transfer it to the roth IRA or only the traditional IRA? I called both vanguard and the institution that holds the account currently and neither seemed to know.

Also, does anyone know how long I can keep the money in the inherited IRA?

Thank you all for your expertise.

ixtap

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Re: 403 b inheritance- can it go to roth?
« Reply #1 on: March 19, 2020, 12:25:16 PM »
I don't believe you can do conversions on inherited accounts.

terran

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Re: 403 b inheritance- can it go to roth?
« Reply #2 on: March 19, 2020, 12:28:42 PM »
Also, does anyone know how long I can keep the money in the inherited IRA?

If you inherited this year I believe the new tax bill requires that inherited IRAs be fully distributed with 10 years, but you can distribute at any time during those 10 years. If you inherited before this year you may be grandfathered in to RMDs over your lifetime, so more research would be necessary.

If you do need to distribute within 10 years and you expect your income to go up within those 10 years, then you should probably try to distribute it evenly during the time your income will be lower.

I don't believe you can do conversions on inherited accounts.

Agreed.
« Last Edit: March 19, 2020, 12:33:35 PM by terran »

mominca

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Re: 403 b inheritance- can it go to roth?
« Reply #3 on: March 19, 2020, 12:45:13 PM »
Thanks, that makes sense. It was this year, so the 10 year rule applies. Could convert it to roth after the transfer? I would like to pay taxes on it this year if possible, and I won't need to touch it for at least 5 years...

terran

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Re: 403 b inheritance- can it go to roth?
« Reply #4 on: March 19, 2020, 01:11:52 PM »
Thanks, that makes sense. It was this year, so the 10 year rule applies. Could convert it to roth after the transfer? I would like to pay taxes on it this year if possible, and I won't need to touch it for at least 5 years...

No, inherited IRAs can't be converted. You could convert any IRAs you contributed to which would have the same effect.

secondcor521

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Re: 403 b inheritance- can it go to roth?
« Reply #5 on: March 19, 2020, 08:58:14 PM »
Two things:

1.  To be clear, the determining factor for the rule that applies is when the original owner died, not when the funds were inherited.

2.  If you have a job where you earn more than $6K per year, you could contribute $6K to your Roth IRA and then withdraw $6K from the inherited IRA to reimburse yourself.  Essentially the same thing as a Roth conversion, just with a few additional wrinkles.  You can also do this times 2 if you are married.