Bob,
I do not know what you are referring to with the “funded/unfunded” reference.

There is no age limit for converting to a Roth IRA in 2010 or any other year. There have been modified AGI limits of 100,000 in place in order to convert, but those limits end after 2009. Therefore, in 2010 anyone can convert to a Roth who have a TIRA or employer plan from which to convert. And for 2010 only, the tax on the conversion is deferred 50% to 2011 and 50% to 2012. For 2011 and later the taxes are due each year you convert to a Roth IRA.

In determining how much to convert, the idea is to limit the amount in each year so that you will not inflate your marginal tax bracket. If you are retired and in the 15% bracket, you would not want to convert so much that your bracket increased to 25% or you would be paying a higher tax rate than your expected tax rate in retirement.

Not sure if this answers your question. If not, please advise what you meant by unfunded dollars……..

• Flag as spam
• Log in to Reply

Tax rules that pro rate IRA distributions between the non deductible and pre tax amounts apply to all, regardless of age.

The after tax amounts in your 401k are tracked by the plan administrator and should show up on your statements. There is nothing you have to do or file. When you take 401k distributions, the 1099R issued by the plan will show how much is taxable and how much is not taxable because it was taxed when you contributed it.

IRAs are very different. Non deductible contributions you make should be reported by you on your tax return every year on Form 8606. This record is what prevents these amounts from being taxed a second time when you take distributions including Roth conversions. With respect to this record, 2010 is not different than any other year other than more people will convert that year because the income limits for conversion will be gone. You should attempt to reconstruct the amount of these contributions and file the respective 8606 forms. The IRS has been accepting these without penalty. You would start with the oldest year and work forward because the non deductible total is cumulative.

You may not be able to reconstruct the amount of each of these contributions from your own records unless you have copies of both your tax returns and amounts of IRA contributions dating as far back as 1987. For example, if your tax return for 1989 did not show any IRA deduction and you made a contribution, then it was not deducted and should show on an 8606. If you need help with the info, you might get some from your IRA custodian if you have had the same one for many years. For tax returns, you would need to order a transcript from the IRS, and I believe there is a small fee for this. The IRS should have a record of each Form 5498 issued by the receiving custodian of your IRA contribution each year. You then match up the 5498 with your return to see if you deducted the contribution or not. This is something you should take care off ASAP whether you plan to convert in 2010 or not because the IRS may soon do away with the penalty free retroactive filing of the 8606 forms. Another possible source of data is your tax preparer if you have been using the same tax service for the last 20 years.

Hope this helps, but just ask if you have further questions.

• Flag as spam
• Log in to Reply

If you converted several years ago and have no present TIRA, they forget about trying to re create any basis. It is too late to amend your return for the conversion if the conversion was done prior to 2006.

As for the current plan, you cannot convert any of it while you are still employer there unless you qualify for an age based in service distribution. Some plans permit these at 59.5 or some later age. Check with the plan administrator if in service distributions are allowed and when. While doing that you can also check if there are any after tax contributions in your account. If you are eligible for in service distributions you should be able to convert next year directly to a Roth IRA. What you posted does not indicate any after tax amounts in the plan, just a breakdown between your contributions and the company match. In that case, any conversion would be fully taxable.

• Flag as spam
• Log in to Reply

No restriction. As long as you are separated from service, the company must allow a full distribution of the funds, including a direct Roth conversion. There are no restrictions on this if you wait until 2010. However, the entire conversion will be taxable and if it will drive you into a higher bracket, you would be better off to directly roll the funds into a TIRA first, and then convert whatever amounts you want to. However, conversions you do in 2010 are less likely do drive you into a higher bracket because the income is spread between 2011 and 2012.

If you elect the direct Roth conversion, it is better to pay your taxes quarterly of from other withholding sources than have withhelding done from the conversion. Tell the plan you decline withholding to make sure that they do not withhold 20% if you do the Roth conversion.

• Flag as spam
• Log in to Reply

Forregistry,

The only restrictions regarding the age of a TIRA would come from your IRA custodian.

To reverse your 2010 ROTH Conversion you have until the due date of your tax return plus extensions. That moves the final date for a “Re-Characterization” of your Roth Conversion to October 15, 2011.

It may be best to do conversions as Alan-oniras suggested, over several years by filling your tax bracket with your conversion amount. This will keep you out of the higher tax brackets.

• Flag as spam
• Log in to Reply