Roth conversion

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holawhatup1
Posts: 1
Joined: Wed Apr 07, 2021 8:56 pm

Roth conversion

Post by holawhatup1 »

I have an existing traditional IRA (rolled over from previous 401k) and a SEP-IRA. Can I convert both of these into a Roth IRA? Will that avoid pro-rata if I do both and for the full amounts?
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FiveK
Posts: 11108
Joined: Sun Mar 16, 2014 2:43 pm

Re: Roth conversion

Post by FiveK »

holawhatup1, welcome to the forum.
holawhatup1 wrote: Wed Apr 07, 2021 9:00 pm I have an existing traditional IRA (rolled over from previous 401k) and a SEP-IRA. Can I convert both of these into a Roth IRA?
Yes.
Will that avoid pro-rata if I do both and for the full amounts?
Yes, but at the cost of incurring full taxation of amounts that pro-rata would only tax partially.

That is, if you are referring to pro-rata taxation in the context of the Backdoor Roth process.
retiredjg
Posts: 43706
Joined: Thu Jan 10, 2008 12:56 pm

Re: Roth conversion

Post by retiredjg »

holawhatup1 wrote: Wed Apr 07, 2021 9:00 pm I have an existing traditional IRA (rolled over from previous 401k) and a SEP-IRA. Can I convert both of these into a Roth IRA? Will that avoid pro-rata if I do both and for the full amounts?
Welcome to the forum. :happy

Both a traditional IRA and a SEP IRA can be converted to Roth. I'm not sure if a SEP IRA at a current employer can be converted to Roth or if you have to wait until you leave that employer.

"Pro-rating" only exists if you have some basis (already taxed money, usually from a non-deductible contribution) in IRA. If you have not made any non-deductible contributions to the rollover traditional IRA there should not be any basis.

If there is no basis, you can convert as much or as little of the traditional IRA as you want - no pro-rating.

Whether you should convert anything to Roth depends on a lot of things, especially your current tax bracket.
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