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There are three ways to fund a Roth IRA--you can contribute directly, you can convert all or part of a traditional IRA to a Roth IRA, or you can roll funds over from an eligible employer retirement plan. In general, you can contribute up to $5,500 to an IRA (traditional, Roth, or a combination of both) in 2017 Roth IRAs).
Roth IRA Conversion: A Roth IRA conversion is a type of transaction in which Traditional IRA (or other eligible retirement plan) savings are moved to a Roth IRA. The amount converted to a Roth IRA is typically taxed as ordinary income in the year of conversion (except for amounts represent-ing basis in your existing plan).
convert tax-qualified assets into a Roth IRA. (For 2010 conversions, income from the taxable conversion may be spread equally over the 2011 and 2012 tax years.) Note, however, that the MAGI (Modified Adjusted Gross Income) phase-out on annual contributions to a Roth IRA remains intact. Only the conversion limitations have been lifted.
Prior to 2010, investors could not execute a Roth conversion if their modified adjusted gross income (MAGI) exceeded $100,000 or if they were a married individual filing a separate tax return. Washington has since repealed those restrictions. Conversion options include: IRA-to-Roth IRA conversion Retirement plan to Roth IRA conversion
Beginning in 2010, the income limitations that have been in place since the inception of the Roth IRA will be eliminated so anyone with a traditional IRA, 403(b) or 401(k) plan will now be able to make a Roth conversion. While the decision to convert to a Roth account can provide tax savings for some, it is not a wise move for all.
When an IRA owner decides to move all or part of his or her traditional IRA (including SEP and SIMPLE IRAs) assets to a Roth IRA, it is called a conversion. An individual may also roll over a qualified plan account (i.e., 401(k)) and convert such funds into a Roth IRA directly without first opening a traditional IRA.
Should a client convert to a Roth IRA? marginal tax bracket in future? Will client die with a substantial charitable bequest? Does client need the IRA funds to meet annual living expenses? Does client have outside funds to pay tax on the conversion? Can “heirs” wait ten years after client’s death to access the funds?
