Roth Conversion Question

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cresive
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Location: Virginia, USA

Roth Conversion Question

Post by cresive » Tue Sep 12, 2017 11:29 am

Hello all,
I want to say thanks for all the help I have received on this site. I have a question concerning converting money from a pretax account to a Roth account. I only have 401/403 pre-tax money that is associated with my employer and some money in a Roth IRA. They are all with Fidelity, but the Roth is separate from my work accounts. I am 55 and still employed If we run into a major correction, I was hoping to convert money within my 400 accounts to my Roth.

1. Can I move money from a work 401A or my 403B to a Roth IRA that is not associated with my employer?

2. What effect does converting money do to my yearly donation limit? That is, if I convert $25K to my Roth, does that eliminate my $6500 donation for the year?

3. IF I cannot convert to my Roth IRA, would it make sense to convert within my 401A/403B? If so, what does any conversion do to limits within those accounts?

Thanks,
Ben

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Roth Conversion Question

Post by livesoft » Tue Sep 12, 2017 11:33 am

1. Yes, but you wrote you do not have such an account which would have come from a different employer that you are no longer working at.

2. I assume by "donation" you mean "contribution" which is the IRS term. Conversion has no effect on contribution limits.

3. Does your 401a / 403b have a Roth option? Does your employer plan allows in-plan conversions? I would not think there are any conversion limits, but I don't know. I suppose it could make sense, but would all depend on your tax brackets, when you actually retired, your tax brackets in retirement, etc.
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FiveK
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Re: Roth Conversion Question

Post by FiveK » Tue Sep 12, 2017 11:46 am

cresive wrote:
Tue Sep 12, 2017 11:29 am
I am 55 and still employed....
1. Can I move money from a work 401A or my 403B to a Roth IRA that is not associated with my employer?
Yes, but you will likely have to pay a 10% penalty, in addition to whatever ordinary income tax on the amount moved. E.g., see 403(b) Plan: Distributions. I'm assuming the "not associated with my employer" refers to the Roth IRA, not "a work 401A or my 403B."

Livesoft covered points 2 & 3.

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Earl Lemongrab
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Re: Roth Conversion Question

Post by Earl Lemongrab » Tue Sep 12, 2017 4:17 pm

If you mean your pretax contributions to a 401(k) or 403(b) at your current employer (do you actually have both?) then the answer to #1 is NO. It's against the law to do a rollover of those contributions to an IRA at your age. If you were 59-1/2 it would be possible, but would require the plan to allow it. Other contributions, like your after-tax, company contributions, or rollover contributions, would eligible for rollover out.
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Earl Lemongrab
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Re: Roth Conversion Question

Post by Earl Lemongrab » Tue Sep 12, 2017 4:36 pm

FiveK wrote:
Tue Sep 12, 2017 11:46 am
cresive wrote:
Tue Sep 12, 2017 11:29 am
I am 55 and still employed....
1. Can I move money from a work 401A or my 403B to a Roth IRA that is not associated with my employer?
Yes, but you will likely have to pay a 10% penalty, in addition to whatever ordinary income tax on the amount moved. E.g., see 403(b) Plan: Distributions. I'm assuming the "not associated with my employer" refers to the Roth IRA, not "a work 401A or my 403B."
This is wrong in two ways. One is that you can't take a rollover (at least of deferrals). See the information on when you can take a distribution in that article you referenced. The only thing available in the OP's circumstance would be a hardship distribution, and that's not eligible for rollover. Second, if a distribution were possible (say the OP was > 59-1/2), then there would be no penalty if rolled over to a Roth IRA as long as taxes were not taken out.
This week's fortune cookie: "The stock market may be your ticket to success." I sure hope so!

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FiveK
Posts: 2757
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Re: Roth Conversion Question

Post by FiveK » Tue Sep 12, 2017 5:38 pm

Earl Lemongrab wrote:
Tue Sep 12, 2017 4:36 pm
FiveK wrote:
Tue Sep 12, 2017 11:46 am
cresive wrote:
Tue Sep 12, 2017 11:29 am
I am 55 and still employed....
1. Can I move money from a work 401A or my 403B to a Roth IRA that is not associated with my employer?
Yes, but you will likely have to pay a 10% penalty, in addition to whatever ordinary income tax on the amount moved. E.g., see 403(b) Plan: Distributions. I'm assuming the "not associated with my employer" refers to the Roth IRA, not "a work 401A or my 403B."
This is wrong in two ways. One is that you can't take a rollover (at least of deferrals). See the information on when you can take a distribution in that article you referenced. The only thing available in the OP's circumstance would be a hardship distribution, and that's not eligible for rollover. Second, if a distribution were possible (say the OP was > 59-1/2), then there would be no penalty if rolled over to a Roth IRA as long as taxes were not taken out.
Thanks - must have been low blood sugar or something. :oops:

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