I’ve converted some funds from a traditional IRA to a Roth IRA. I would also like to rollover (in the same year as the conversion) some funds from a 401K to a traditional IRA. Is the Roth IRA conversion considered to be part of the “IRA once per year rule”? Thank you.
Be careful about the rollover from 401k to IRA in the same year as a Roth conversion as it will have ramifications on the taxable amount of the conversion. The pro rata rule applies to the balance of ALL IRA accounts at year end.
The pro rata rule only has an effect if there is basis in the IRA from non deductible contributions.
Thanks for reposnes! I’ve read the IRS rollover publication and it’s not crystal clear and the IRS is a unforgiving government agency. Thx!
I would like to know if it is possible to do the following:1. I am retired and 59 years and 3 months old. I have mixed traditional and Roth TSP. My Roth TSP is past the 5 year rule. I would like to transfer a portion of my TSP, $250K, to a traditional IRA. And then on a monthly basis, convert 3K of the transferred traditional IRA to a Roth IRA until the traditional IRA is depleted. I do not intend to use the money unti 20 years after. Actually, I intend to leave it for my children.
I believe that under current TSP rules (for which legislation is being introduced to modify) your distribution flexibility is limited and that includes having to distribute both pre tax and Roth TSP amounts in proportion. So if 250k is half of your pre tax TSP value, to roll that out you will also have to roll half of your Roth TSP out at the same time. The Roth portion of course would have to go to your Roth IRA. For the 250k now in your TIRA, you can convert any amounts you wish to your Roth IRA. Therefore, the only challenging part of your plan is to navigate the TSP distribution restrictions for partial distributions. You might also want to track the progress of proposed modifications of these rules to provide better flexibility. You will also want to roll the entire Roth TSP balance out before the year you reach 70.5 to avoid Roth TSP RMDs. There are no Roth IRA RMDS for Roth owners, but your non spouse beneficiaries will have to take inherited Roth RMDs.
Permalink Submitted by William Tuttle on Tue, 2017-06-06 16:00
The once per 12 month period (not calendar year) rule does not apply to Roth conversions and rollovers between qualified plans and IRAs or trustee-trustee transfers between IRAs.
Permalink Submitted by TC Flippo on Wed, 2017-06-07 13:42
Thank you.