Contributing to a Roth Conversion account
My client is interested in contributing to a Roth IRA for 2010. He has a Roth IRA funded by a conversion in 2009 of some SEP IRA money. I’m thinking about setting up a new contributory Roth IRA for this new money, but what are the downsides to just adding this money to his existing Roth conversion IRA.
Permalink Submitted by Alan Spross on Thu, 2010-12-02 00:30
No major downsides.
One issue with the combination is that if either the conversion is recharacterized or the regular contribution is returned or turns out to be an excess contribution, the earnings calculation for determining the actual amount recharacterized or distributed is based on the total account investment results. But most custodians can figure the earnings amount with their software programs, so it is no big deal.
The tax rules are the same regardless of whether the Roths are combined or in separate accounts, since for tax reasons it is just one combined Roth account anyway.
Permalink Submitted by Michael Moffitt on Thu, 2010-12-02 15:41
Thanks, Alan.