roth conversion strategies for 65 retired person
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roth conversion strategies for 65 retired person  등록일  2021-01-25

While Roth IRAs grow tax … I think you’ll need to decide this with an accountant. I have a 403(b) that I am wanting to convert to a Roth, but I am still employed. It works for us. If you do a Roth conversion before you see these big gains, then you will be paying taxes on a lower dollar amount and all growth in that account will be tax free. I just made a partial Roth conversion for 2017. Hi Tim – In theory, yes. After age 70.5, can I take RMD (estimated at $40k) and then do a conversion, too, on additional $45k? Hi Laura – Actually, withdrawals shouldn’t be a problem. I am looking to take advantage of my employers post-tax 401K plan and in-plan conversion Roth. Thanks, Tam. Even though it’s good to have a few early retirement strategies up your sleeve, the more I looked into a Backdoor Roth Ladder, the more I realized that this technique really does have some pretty significant advantages over a 72t. I made $250k in 2016. Wouldn’t the same apply to a Traditional IRA that holds after-tax contributions? I am 89 yrs, and have a IRA at Vanguard for many years and want o know the difference between a Transfer to Transfer and a Same Transfer. Here is what I’d like to accomplish – For 2016 tax year, I am eligible to contribute to a Roth IRA, so I plan to open and contribute the max to a Roth IRA prior to the April cutoff date. If so, is that because it was trading at a discount? Had I realized I was going to get hit with the married filing separately income limit, I would have forgone an IRA deposit for this year and just set up a traditional and put in $5,500 into that. You’ve got a very specific situation that requires professional direction! A US citizen, living in China, still has to report all of the income made in China on his/her US tax return. Withdrawals from a Roth IRA you’ve had less than five years.”. For the stocks, the taxable amount was the closing price on the day before the transaction, which seems fair. Therefore, in Turbo Tax, you put it under an IRA distribution which adds to your income similar to declaring interest received or any other source of income. I believe the answer is that there are no limits to partial conversions but I have seen conflicting information. In addition, Roth IRAs do not have required minimum distributions for the original owner, whereas Traditional IRAs are subject to RMDs in the year you reach age 72, if you have not reached age 70½ on or before 12/31/2019 (or age 70½, if you reached age 70½ on or before 12/31/2019). “Bottom line: 9.9 times out of 10, a Roth is the way to go”, I disagree. I will pay the taxes myself, not use conversion money (30,000, so it will generate taxes). Blog. Hi Eugene – 1. This article covered exactly what I was interested in learning. Since the contribution to the traditional IRA was not tax-deductible, there will be no tax liability on the conversion, except on any earnings accumulated on that contribution before it was converted. Thanks for the article. Hi Jeff I am retired and will be 70 1/2 December, 15, 2018. Jeff – In May 2015 my wife and I each made $6,500 non-deductible contributions to traditional IRAs and and then converted them to ROTH IRAs in June 2015. That said, if your employer plan does not provide for a rollover to a Roth IRA (as may be the case with a state 403b), you will have to do the rollover into a traditional IRA first (see a deeper discussion of this here). That’s a lot of capital to burn through before you even reach … Would that put my ‘income’ to $60,000 or would the money be taxed at a rate corresponding to my earned income for the year? She has a traditional Ira I want to convert to Roth. And, then convert my pension/401K to a new IRA account #2 LATER in the same calendar year (i am retired). Hi Lee – First of all, I don’t think you have to report what are literally pennies of income. I’d contact the IRA trustee and see what they recommend. Do we now need to account for this $10,000 in a traditional IRA in calculating the pro rated taxable amount of her $6,500 Roth IRA conversion? But please check with a CPA to make sure. Thanks. So if my trustee let’s me put any amount into the traditional Ira at one point in time, I can convert it all within 60 days? Plan participants may direct the distributing plan administrator to send the pretax portion of a withdrawal to a traditional IRA and the after-tax portion to a Roth IRA, with the result being a tax-free direct rollover to … One week later, I contributed another $5,500 after-tax dollars out of my savings into the Traditional IRA for the 2014 year. You simply tell your traditional IRA trustee to direct the money to the trustee of your Roth IRA account, and the whole transaction should proceed smoothly. So we can only make non-deductible contributions to a IRA. It will create taxable income which we will pay from savings. Hi Jeff. On the taxes on capital gains, which I presume you mean investment earnings, my guess is that you will have to pay taxes on that amount as well. But please check with your tax preparer to make sure. Hi Georgr – That’s a good plan, paying the tax liability with non-retirement funds. Thank you. I no longer own any traditional IRAs. Discussions of how to do Roth conversions, tax rates before and after retirement, RMD’s at 72, % of social security taxed, enough money to live on each year, the five year rule for distributions from a Roth IRA (even if rolled from a Roth 401K), etc. I believe that the IRA and 401k conversions are separate conversions, so you’d be looking at the tax liability only on the 401k amount. Hi John, that’s an advanced question, and I’d direct you to a tax preparer (preferably a CPA). Hi Luis – You can do the conversion, and there is no limit as to how much you can rollover, nor is there any requirement of having earned income (that’s necessary only for new Roth IRA contributions). You will have to allocate at least some of the conversion balance to tax-deductible contributions, plus the investment earnings in the plan. But to be on the safe side, you may want to make the IRA contribution first, then do a single conversion to the Roth. The only saving for retirement we have is 401k which we are both maxing out. Great article! Let me start by saying that I’m not even remotely financially savvy. All the traffic is going the other way, as you might imagine. If you do, the portion used to pay the tax estimate will be deemed a permanent distribution, and you will pay a 10% early withdrawal penalty over and above the tax liability. Thank you for the reply Jeff. Is there any advantage in doing a Roth conversion this year? also how do I accomplish this task of conversion? You should be good to go with your plan. Or it doesn’t matter, as I can convert IRA to Roth for any amount, any time and any number of time regardless of tax year? Based on the numbers above, we have $40,000 total after-tax contributions to non-Roth IRA’s. What are the requirements for conversion if you are still employed when converting? The only tax liability will be on any earnings accumulated in between the two events. If a Roth … How much of that $6500 will be considered taxable? You can’t withdraw say, $10,000 and declare that it’s all after-tax contributions. I have to file with California already because my old employer decided to pay me severance pay in 2018 even though I had not worked in California since 2017, i assume that should not complicate matters, i assume that zero of my conversion should be reported to California. Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. On an IRA rollover where the funds go from one trustee directly to another (without every passing through your hands) there is no limit. I have balances in, and continue to contribute to the pre and post. or must I sell them? I have been contributing to my spouse’s traditional IRA for the last 3 years at $6500 per year, since she is above 50. I have a question about assets that can be placed in a Roth. Each of us holds Roth contributions with 3 different brokers all of which have fees coming out to the point where it doesn’t seem realistic to maintain these accounts, more fees have come out in the past 10 years than gains. I will be 49 at the end of this year. The Math in the example makes no sense to me. In Step 1: $6,500/ $346,000 = 1.88%, how did you come up with $346,000? But this is why I say you need to talk to an accountant. It’s taxable only to the degree that contributions were tax deductible when made, as well as the income earned on those contributions. My question is this: Ideally, I’d like to rollover my Roth 401k dollars from my old firm into a Roth IRA but it seems that because my AGI is above the limits, I could never make a contribution to this account. Given his savings, Peter decides to postpone his Social Security benefits until age 70. No problem Brett. As I understand the rules, the first dollars moved from the IRA are counted toward the RMD. – (Assuming I’ve done this conversion from Traditional IRA to Roth in February 2017), can I also make a Tax Year 2017 contribution of $5,500 to that Roth, in say March 2017, even before knowing whether my 2017 income will exceed the Roth contribution limit? I’m trying to figure out how to do both this year and in future years. Here’s how that is calculated: Step 1: Calculate non-taxable portion of total Non-Roth IRA’s: Total after-tax contributions / Total Non-Roth IRA Balance = Non-Taxable %: Step 2: Calculate the non-taxable amount by converting the result to Step 1 into dollars:14.29% x $140,000 = $20,000, Step 3: Calculate the amount that will be added to your taxable income:$140,000 – $20,000 = $120,000. We selected to apply these to Tax Year 2016. I have money in an old 401K from a job I left a couple years ago. Even if they do, you might have an issue with the breakout between the tax-deductible and non-tax-deductible contributions. Hello, I have a 457(b) which is all pre-tax contributions and gains. For me, my ROTH conversion not only disqualified me from getting Obamacare, but I also had to pay back the premium tax credit. Possible workaround actions:: 1) My workplace 401K does allow for a reverse roll over of my Rollover IRA and Roth IRA. Unless you file separately, then you’ll have to consult with a CPA. Have you wanted to get a Roth IRA started but you think that your annual contribution is not enough to get you to the goal you have in mind? Hi great article can you please answer a couple of questions. If you do request clarification, please get back to us with the determination. You’ve got a lot that you’re planning to do there, and you need to make sure that you do it right. These have been partial Conversions. You might contact the Roth IRA trustee to get an explanation, that way you’ll know what to do and what to expect going forward. The two main types of IRAs are Traditional and Roth. So if that’s 25%, then you’ll pay 25% on the conversion amount. Find out more and explore different tax strategies with Personal Capital. Am I further correct in assuming that I will not have to pay any penalty because it will be converted into a Roth IRA rather than simply being liquidated and transferred to me directly? I’m wanting to isolate those nondeductible contributions and move them to a ROTH to tidy things up. FICA taxes are due on earned income only. unrealized capital losses). But what if the remaining funds grow to an even $400,000 at age 60 and i want to take it out? Will consult someone w/ state-specific expertise. Hi Richard – Not really. Thanks. She's 73, retired, and files her taxes jointly with her spouse. 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