Permalink Submitted by Alan Spross on Thu, 2008-08-21 20:17
Note that starting in the year a traditional IRA owner reaches age 70.5, he must FIRST withdraw his RMD before converting an amount to a Roth. The RMD amount cannot be converted and must come out first, but that still provides an opportunity to convert amounts in excess of the RMD.
Each year a Roth conversion is done, the traditional IRA will have a lower year end balance and that will reduce the RMD due for the traditional IRA in the following year.
Of course, both the conversion and the RMD will be taxable, so consideration should be given to the marginal tax bracket triggered by the conversion. Neither the RMD NOR the converted amount count toward the 100,000 conversion income limit. Starting in 2010, there is no longer any income limit to convert.
Permalink Submitted by Brandon Stuerke Stuerke on Mon, 2008-08-25 04:05
Just curious if anyone has heard any rumors as to rather or not it will be a one year deal or if they will allow conversions beyond 2010 as well regardless of income limitations?
Permalink Submitted by Alan Spross on Mon, 2008-08-25 04:11
It is clearly not a one year deal. After 2009, the income limit goes away for all later years.
What is different in 2010 only is the option of deferring the tax on the 2010 conversion, half each to 2011 and 2012. After 2010, all conversions are taxable in the actual year of the conversion.
Permalink Submitted by Lorraine DiPaolo on Thu, 2008-08-21 14:23
Would Required Minimum Distributions still be required once a 70 1/2 year old person converts to a Roth?
Permalink Submitted by Alan Spross on Thu, 2008-08-21 20:17
Note that starting in the year a traditional IRA owner reaches age 70.5, he must FIRST withdraw his RMD before converting an amount to a Roth. The RMD amount cannot be converted and must come out first, but that still provides an opportunity to convert amounts in excess of the RMD.
Each year a Roth conversion is done, the traditional IRA will have a lower year end balance and that will reduce the RMD due for the traditional IRA in the following year.
Of course, both the conversion and the RMD will be taxable, so consideration should be given to the marginal tax bracket triggered by the conversion. Neither the RMD NOR the converted amount count toward the 100,000 conversion income limit. Starting in 2010, there is no longer any income limit to convert.
Permalink Submitted by Brandon Stuerke Stuerke on Mon, 2008-08-25 04:05
Just curious if anyone has heard any rumors as to rather or not it will be a one year deal or if they will allow conversions beyond 2010 as well regardless of income limitations?
Permalink Submitted by Alan Spross on Mon, 2008-08-25 04:11
It is clearly not a one year deal. After 2009, the income limit goes away for all later years.
What is different in 2010 only is the option of deferring the tax on the 2010 conversion, half each to 2011 and 2012. After 2010, all conversions are taxable in the actual year of the conversion.
Permalink Submitted by Brandon Stuerke Stuerke on Mon, 2008-08-25 04:16
Thank you for the insight. Also for being so quick to reply. You are amazing.