Converting a nondeductible IRA to Roth

[TheDogFather]

Mrs Dogfather has a small IRA account from the last couple of years prior to retirement where contributions were all after-tax. Given there would be no capital gains (all bond funds which we know how they've done from a NAV perspective recently) is there any reason not to convert it to a Roth?

[WoodSpinner]

Mrs Dogfather has a small IRA account from the last couple of years prior to retirement where contributions were all after-tax. Given there would be no capital gains (all bond funds which we know how they've done from a NAV perspective recently) is there any reason not to convert it to a Roth?

Does the Mrs. Have any other IRAs with Deductible contributions?

Have you been tracking the Non-Deductible contributions correctly on form 8606?

If the Mrs. has No Deductible contributions and 8606 has been filled correctly, a Roth Conversion is a great idea.

WoodSpinner

[TheDogFather]

Mrs Dogfather has a small IRA account from the last couple of years prior to retirement where contributions were all after-tax. Given there would be no capital gains (all bond funds which we know how they've done from a NAV perspective recently) is there any reason not to convert it to a Roth?

Does the Mrs. Have any other IRAs with Deductible contributions?

Have you been tracking the Non-Deductible contributions correctly on form 8606?

If the Mrs. has No Deductible contributions and 8606 has been filled correctly, a Roth Conversion is a great idea.

WoodSpinner

She does not have other IRAs. We have been using form 8606.

[mikejuss]

Hmm--why would Mrs. Dogfather have put nondeductible contributions into a traditional IRA in the first place (if she didn't intend to immediately convert them to a Roth IRA)?

[TheDogFather]

Hmm--why would Mrs. Dogfather have put nondeductible contributions into a traditional IRA in the first place (if she didn't intend to immediately convert them to a Roth IRA)?

The goal was to simply increase our allocation to bond funds while avoiding paying taxes on dividends while working and having higher marginal income tax rates. We were entirely ignorant of Roth conversions at the time.

[toddthebod]

Mrs Dogfather has a small IRA account from the last couple of years prior to retirement where contributions were all after-tax. Given there would be no capital gains (all bond funds which we know how they've done from a NAV perspective recently) is there any reason not to convert it to a Roth?

All dividends/interest from the bond funds are taxable on withdrawal or conversion.

[mikejuss]

Hmm--why would Mrs. Dogfather have put nondeductible contributions into a traditional IRA in the first place (if she didn't intend to immediately convert them to a Roth IRA)?

The goal was to simply increase our allocation to bond funds while avoiding paying taxes on dividends while working and having higher marginal income tax rates. We were entirely ignorant of Roth conversions at the time.

That seems really overwrought (to me). Were you buying hundreds of thousands of dollars of bonds that would have thrown off significant dividends?

More to the point, are there significant gains within the traditional IRA? Do remember that when you convert the nondeductible contributions from your traditional IRA to your Roth IRA, your gains will be taxable (though your basis won't be). You can find more information here: https://www.bogleheads.org/wiki/Backdoo ... Example_1a.