403B question
I did not get my question in on time when listening to Mr. Slott on Sunday’s Financial Insights program. I am 75 and retired from Harvard. I have a 403B with my son as beneficiary. I have taken the mandatory withdrawals but in in view of the fact that the tax rates may be going up as discussed today, is there any way that I can turn this into some kind of IRA that would be tax free later? I realize that I would probably have to pay a lot in taxes if I do this. Would this also put me in another income bracket at tax time? What would you suggest?
thank you,
Enice Matera
[email protected]
Permalink Submitted by Alan Spross on Sun, 2011-04-10 23:20
You must take your 2011 RMD prior to doing a rollover or direct conversion.
Once that is done, you should get with a tax planner regarding how much you should convert and given your estate plan. Converting too much in a single year will inflate your tax bracket. But amounts you convert to a Roth IRA will no longer be subject to RMDs and will be tax free if you or a beneficiary withdraw them later. All earnings in the Roth will also be tax free after 5 years if this is your first Roth IRA.
Tax rates will probably rise for the most part in those brackets above the 25% bracket, but state income taxes should also be considered.