Contributing to IRA after 70 and 1/2 and retired
I turned 70 1/2 on January 8 2013 and retired in 2012. My wife is two years younger. I want to contribute 5000 to each of our accounts in a 2012 IRA. I cant do a Roth because of my income is too high….I cant do a regular IRA tax deductible because of my income and because I was covered by a pension plan in 2012.
Can I contribute to a after tax basis to a traditional IRA, then immediately convert to a Roth. I would not have tax to pay unless I made money on the contribution.
At the same time I must take a RMD by the end of 2013.
Is what I posted correct? Any timing problems besides doing it before April 15?
Thanks
Roger
Permalink Submitted by Alan - IRA critic on Tue, 2013-03-26 20:54
You can make the non deductible TIRA contribution for 2012 (your last year for TIRA contributions) and convert it, however all of your non Roth IRAs must be included in calculating the taxable amount of the conversion. If you had no other such IRA accounts and converted right after making the non deductible contribution, your conversion would be tax free. There IS a timing issue if you do a 2013 conversion. Since 2013 is your first RMD year, you would have to distribute your 2013 RMD before doing the conversion. Since 2013 is your first RMD year, you could defer your first RMD as long as 4/1/2014. To do that you could not convert until after both your 2013 and 2014 RMDs were distributed. You could then convert an additional amount in addition to your RMDs. Again, the key to your main question is whether you have pre tax IRA values that would cause your conversion of whatever amount to be mostly taxable.
Permalink Submitted by roger sheets on Tue, 2013-03-26 21:05
OK thanks. I read your comments on the previous similar conversion.I do have over 50000 in my TIRA so I would have to consider the whole amount. MY wife has already converted all of hers to a Roth; so she has nothing left in her TIRA. I should therefore put 5000 in her TIRA and then convert that to a Roth. That way I would not have to worry about the tax situation and the RMD would not be an issue. I would not be able to put the extra 5000 for myself in an IRA tho.Any tax forms that I need to complete for this?ThanksRoger
Permalink Submitted by Alan - IRA critic on Wed, 2013-03-27 00:23
As long as she is eligible for a TIRA contribution (not yet 70.5) and has earned income or can use your earned income as a spousal contribution, it’s a good plan to make that contribution and convert it right away to a Roth. Only Form you need here is Form 8606 to report any non deductible contributions to a TIRA and also a to report the conversion in a different section of the 8606. Form 8606 is individual, ie only holds one SSN.