[SaucyJim]

Originally Posted by Windguy

I was under the impression that you can’t move money into a Roth unless you are making wages (have a job). I tried to move some of my IRA into my Roth after I retired, but I was not allowed to do so.

I’d be interested to know if you were misinformed. My understanding was that it was contributions that were limited to income in a given year - not rollovers. I could be wrong, though. As my first two wives. ������

[dewilson58]

Originally Posted by Windguy

I was under the impression that you can’t move money into a Roth unless you are making wages (have a job). I tried to move some of my IRA into my Roth after I retired, but I was not allowed to do so.

Wrong.

[retiredguy123]

I have done the math several times for a Roth conversion, and I have decided that it is not a good idea.

The only good argument I have heard in favor of a Roth conversion was from a guy who wanted to leave money to his children free of taxes and the hassle associated with withdrawing money from a traditional IRA and paying taxes on it. That made sense to me.

[M2inOR]

Originally Posted by retiredguy123

I have done the math several times for a Roth conversion, and I have decided that it is not a good idea.

The only good argument I have heard in favor of a Roth conversion was from a guy who wanted to leave money to his children free of taxes and the hassle associated with withdrawing money from a traditional IRA and paying taxes on it. That made sense to me.

It's all dependent on the size of the IRA amount you plan to convert.

It also depends on your age and your view of the future for taxes and longevity.

For some it's an easy decision to not convert. For others, it's an easy decision to convert.

Find a fee-based advisor for a 2nd opinion AFTER reading books on the topic, and AFTER you understand the pros and cons.

As I wrote previously, it's not for everyone.

For US, it worked out well as we had both IRAs large enough that made sense, AND had savings in an account to pay the required estimated taxes.

This requires you to read and understand all aspects of the process.

[lawgolfer]

The older one gets, a conversion makes less sense. At my age of 80, I could convert to a Roth and pay a large amount in taxes at the highest rate, only to die next year. This would leave a reduced sum to our son and grandchildren, which they must withdraw over the next 10 years. Although the withdrawals would be free from income tax, the total amount would be significantly reduced from what they would receive had I not converted.

What the discussion in this thread shows is that our children and grandchildren need to be shown the benefit to be gained from putting everything they can into a Roth. The greatest benefit from a Roth is from making 50+ years of deposits, letting them grow free of income taxes, then making tax-free withdrawals after retirement.

The best thing you can do for children grandchildren, or great-grandchildren, is to help them deposit all they can in a Roth from an early age. Money paid into a Roth must have been "earned". One great method to help a child etc. is for a parent, grandparent, or great-grandparent to match the child's earnings and deposit the matching money in a Roth. If your 14 year old granddaughter earns $500 by babysitting, open a Roth for her and put $500 in her account. It would be wonderful if you were able to deposit the maximum of $7K/yr, but few of us have that ability. However, every dollar paid into a Roth will grow to a large sum over the following 50+years

[nn0wheremann]

Originally Posted by dewilson58

Convert = guaranteed tax payment.

No Convert = maybe tax payment.

I got a guy in Chicago (actually in Oakbrook) that I pay to worry about this. He does a good job, and I have no worries. Itake out my RMD’s, make my QCDs, and my cas balance keeps going up. It is nice to be retired.

[Plinker]

Originally Posted by jimbomaybe

There is a work around for that . From Investopedia
" A note for multiple account owners: The five-year clock starts with your first contribution to any Roth IRA—not necessarily the one from which you’re withdrawing funds. Once you satisfy the five-year requirement for one Roth IRA, you’ve fulfilled it for all of them.
7
Internal Revenue Service. "Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)," Pages 31-32.


Any subsequent Roth IRA is considered held for five years. Rollovers from one Roth IRA to another don't reset the five-year clock.
8

This is a common mistake. There are two, 5 year rules. There is a huge difference between a ROTH rollover and a ROTH conversion. Your statement is correct for ROTH IRA’s you rollover. However, EACH conversion IRA to a ROTH IRA starts a new 5 year clock.

I’m 65 and Just Did a Roth IRA Conversion to Avoid RMDs. Does the 5-Year Rule Apply to Me?

[will1546]

Talk to a certified financial advisor where you file your taxes.

[dewilson58]

Originally Posted by nn0wheremann

I got a guy in Chicago (actually in Oakbrook) that I pay to worry about this. He does a good job, and I have no worries. Itake out my RMD’s, make my QCDs, and my cas balance keeps going up. It is nice to be retired.

Oakbrook, I miss the Tin Fish.

[JRcorvette]

Originally Posted by Laker14

I'm mulling over the idea of making some substantial Roth conversions from my regular IRA account.

Other than a couple of homes, one in TV and one on a lake in NY, all of my money is in IRAs. I'm 71, and with the amount in my IRAs, and my yearly draw, I am in a comfortable position, UNLESS...where my plan gets shaky is if I or my wife live into our mid-90s (we have some history of long life-spans as well as some history of early demise, so it's a crap shoot), and we have all of our money in IRAs, we could get into some very heavy RMD years, with exorbitant tax rates, and serious depletion of our wealth.

So, it seems to me that Roth conversions over the. next 10 years could be a good hedge against that. From my calculations, somewhere in the 4 or 5 year range would be the break-even point. After that it's a clear win.

From what I've researched, the immediate costs would be obviously, more income tax now, and a bump in our Medicare premiums. Factoring those in, we get the tax back later when we withdraw the Roth money tax-free, and at the pace required of our lifestyles, not at a pace dictated by the IRS.

Furthermore, there is a very good chance that only one of us would survive into such an old age, and the survivor would be taxed at the Single rate, which would be even more of a burden.

As long as I am certain (and I'm as certain as I can be) that we won't need to tap the Roth IRA for 10 years, this seems like a no-brainer.

I'm interested in the opinions of others who may have done this, or are considering doing this, and what their thought processes are.

We have been moving money out of our IRA into a ROTH for several years now. Taxes are as cheap as they ever will be. We take as much as we can and stay in the 22% bracket. Yes we will pay more on the Medicare side but it is still the smartest move you can make.
One other thing a ROTH being a tax free haven is it much better for your kids to inherit a ROTH vs an IRA.

[Plinker]

Originally Posted by JRcorvette

We have been moving money out of our IRA into a ROTH for several years now. Taxes are as cheap as they ever will be. We take as much as we can and stay in the 22% bracket. Yes we will pay more on the Medicare side but it is still the smartest move you can make.
One other thing a ROTH being a tax free haven is it much better for your kids to inherit a ROTH vs an IRA.

Filling your tax bracket with a Roth conversion can be a smart move. Don’t forget, the next tax bracket is only 24% (2% more). If married, you can convert an additional $182,850 for just under $3,700 in additional taxes over the 22% rate. If single, an additional $91,425 for around $1,800 in additional taxes over the 22% rate. Who knows how long this small spread between tax brackets will last? This could be a way to supersize your conversions and reduce RMD’s, if so inclined. Talk to a fee-only (not fee-based) advisor or your CPA.

[Pballer]

Originally Posted by Plinker

Don’t forget, you will not be able to access the converted ROTH money for a period between 4 years plus one day to 5 years, depending on what date you do the conversion. Regardless of the date of your conversion, the IRS starts counting the 5 year wait on January 1st of the year of conversion. So, a conversion on July 1st has a 4 1/2 year wait while a December 31st conversion only waits 4 years plus one day. Consider waiting until mid-December to convert. Each conversion starts a new wait period.

I believe this needs to be corrected. You can withdraw the original principal from the Roth conversion at any time without penalty. It is the earnings on the original converted principal that are subject to the 5 year rule.

[Bill14564]

Originally Posted by Pballer

I believe this needs to be corrected. You can withdraw the original principal from the Roth conversion at any time without penalty. It is the earnings on the original converted principal that are subject to the 5 year rule.

The original looks correct to me. If you contribute wages to a Roth then those can be withdrawn any time. If you convert an IRA to a Roth then the waiting period applies. And, as stated, it appears that each conversion starts its own waiting period.

[Aces4]

The government could certainly change the taxation of Roth IRAs in the future. There’s already talk about that.

They said they’d never tax Social Security. Those rascals decided to tax Social Security. What if they do the same thing with the Roth?”

We have to remember what poor financial shape this country is in and the dollars have to come from somewhere.

[Pballer]

Originally Posted by Bill14564

The original looks correct to me. If you contribute wages to a Roth then those can be withdrawn any time. If you convert an IRA to a Roth then the waiting period applies. And, as stated, it appears that each conversion starts its own waiting period.

I’m 65 and Just Did a Roth IRA Conversion to Avoid RMDs. Does the 5-Year Rule Apply to Me?