Author Topic: Roth Conversion Ladder - Real Question, How is it Handled by Brokerages & Tax SW  (Read 1675 times)


  • 5 O'Clock Shadow
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  • Posts: 17
The Roth Conversion Ladder Ė letís talk about the elephant in the room. And by the elephant, I donít mean the IRS. I mean the brokerages and the tax software/preparers. For this post, Iím going to play the devilís advocateóbecause deep down, I do want to believe in the Roth Conversion Ladder.

So, has anyone exercised a Roth conversion prior to age 59Ĺ without having met the other requirements for a qualified distribution? What I would be interested in knowing is what the 1099 looks like for the year of fund withdrawal and how the tax software treats it? Iím probably going to run an experiment with $10, to see how it turns out, but Iíd like to know what it will say.

The reason I ask is that I see a lot of articles on the Roth Conversion Ladder from people who are or stand to benefit from it, but not a lot from financial institutions. A part of me thinks that SEPP is more widely publicized and acknowledged by financial institutions because itís what allows annuities to distribute penalty free, prior to age 59Ĺ and brokerages benefit from those. I donít see them monetizing benefit from a Roth Conversion Ladder. Schwab and probably others, discourage people from taking non-qualified distributions by convincing people of the restrictions:

But on the other hand, Iíve read the tax rules, forms, even code. What I see are rules that donít explicitly dis-allow it, but donít allow it either.

I would be interested in posts from people who have done it that have their investments with Vanguard, Schwab, Fidelity and that have done their taxes without jumping through loop-holes with Turbo Tax, TaxAct, and other tax programs. Do you have to have a discussion with your brokerage ahead of time?



  • Magnum Stache
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  • Posts: 3725
I'll let you know in a few months after I do my 2018 taxes. I'm planning to do a Roth conversion for tax optimization reasons.

It APPEARS that Fidelity will let me transfer money from IRA to Roth just like I would transfer between any two Fidelity accounts while warning me that it's a taxable transaction.

After that I expect to need to file form 8606 to indicate the taxable amount. That will then end up on line 4b of the newly redesigned 1040.


  • Walrus Stache
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  • Posts: 5199
I've transferred money from a Traditional IRA to a Roth IRA.  When I've done that online, Vanguard's website asks for confirmation because this is a taxable event (ordinary income tax).

I could be wrong, but think it generates an 1099-R.  Worth doing if you can fit it in the 10-12% tax brackets.

Also, as an aside, this is another benefit to tax-exempt bond funds.  Since they don't generate income, that preserves more room in your tax brackets for Roth Conversions.


  • Stubble
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  • Posts: 177
Roth conversion ladder dollars after the 5 year waiting period are just contribution withdrawals. The IRA custodian will generate a 1099R. Turbo tax has a section for IRA/401(k)/Pension plan withdrawals. Or you can search 1099-R. It'll ask about your prior year contributions not previously withdrawn which will kick an 8606 into the mix as terran mentions above.

Also keep your 5498s...