Roth conversion with pre-tax and post-tax dollars
I have a client, age 64, who has a Roth and a TIRA with both pre-tax and post-tax dollars in it. Is there any reason that he cannot convert the TIRA in it’s entirety to the existing Roth? If, so what are the challanges and solutions?
Thanks,
Permalink Submitted by Clyde Wolf on Fri, 2009-03-13 00:28
Bc,
If the client wants to convert the entire TIRA to his ROTH IRA, the client can do so.
I suggest the client convert the TIRA to a new ROTH IRA.
Next year at this time, the client may decide the tax bill is too high, or the value of the ROTH IRA has decreased, and they do not want to pay the tax on the untaxed money in the ROTH IRA. This would require a recharacterization to undo the conversion.
Having these funds in a separate ROTH IRA will make the recharacterization easier.
After October 15, 2010, the client could combine the ROTH IRAs into one ROTH. That is the last day they could recharacterize a 2009 ROTH IRA conversion.