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IRA to Roth IRA
Posted on 9/21/12 at 11:07 am
Posted on 9/21/12 at 11:07 am
I currently have an IRA with $5,900 in it. Would it be a wise move to transfer $5,000 of it into a Roth IRA since this year will most likely be my lowest earning year ever?(My job's start date is October 3rd so I'll only have 3 months of income).
3
Posted on 9/21/12 at 12:04 pm to Beerinthepocket
What you are talking about doing is called a conversion, and if you do it you will be responsible for taxes on the $5900 if you were entitled to and took the deduction for the original traditional IRA contribution(s). IMHO, its a smart move as long as you can pay the taxes with money that you have and dont have to tap the IRA to get it.
Posted on 9/21/12 at 12:19 pm to Dreamweaver
Yes, I've got other money to pay any taxes. Would I be able to convert the entire balance to a Roth IRA or just $5,000 of the $5,900 since $5,000 is all you are allowed to contribute to a Roth IRA in a given year?
Edit: Also, thanks for the response.
Edit: Also, thanks for the response.
This post was edited on 9/21/12 at 12:20 pm
Posted on 9/21/12 at 3:51 pm to Beerinthepocket
You would be able to convert the whole amount since a conversion is not the same as a contribution. You could do the conversion and also a contribution in the same year as long as you are within the AGI limits for a Roth contribution this year ( there are no AGI limits on conversions right now)
Posted on 9/21/12 at 7:48 pm to Beerinthepocket
quote:
this year will most likely be my lowest earning year ever
This is important, yes.
But be aware that you will probably wind up committing yourself to maxing either a Roth or a regular IRA for a while, and that has a much larger tax impact. So if you are going to stick with the traditional IRA it may not be worth the trouble. But if you plan to continue to contribute to the IRA this is a good time to get started.
Posted on 9/21/12 at 8:24 pm to Beerinthepocket
Google "Roth IRA backdoor contributions"
I would convert the current IRA to a Roth and get that tax issue settled, then do an annual Roth by the above method. Not saying it's risk free as it is obviously a loop-hole, but I've read many, many articles and personally feel any risk is low.
I would convert the current IRA to a Roth and get that tax issue settled, then do an annual Roth by the above method. Not saying it's risk free as it is obviously a loop-hole, but I've read many, many articles and personally feel any risk is low.
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