Roth Conversion/Multiple IRA’s
I have a traditional IRA, ($80,000)fully taxable, and a rollover IRA from 401k($320,000) also fully taxable. I would like to convert the traditional IRA($80,000) completely to a Roth and leave the other alone. I have heard that all IRA’s must be converted proportionately. If I wish to convert about $80,000, must I take part from each? Neither has any after tax money in it. Thanks.
Permalink Submitted by Alan Spross on Mon, 2010-03-29 19:05
What you heard about converting proportionately only applies if you have after tax basis on Form 8606. And even then it only applies to calculation of the tax free portion and has nothing to do with which IRA you choose to convert.
So you can convert either IRA or any portion of either IRA you wish and do not have to be concerned with proportions.
Also, note that if you live in a state that does not fully protect IRA accounts from creditors, you should keep the rollover IRA and any conversions from the rollover IRA in separate accounts from your other non rollover IRAs or their conversions. The reason is that rollover IRAs are protected in federal bankruptcy without a dollar limit, otherwise the protection is limited to 1 million. If you are sure you will never reach 1 million in your lifetime, then no there is no need to keep them separate.