roth conversion
if at age 71 you have not taken any distribution from ROLL OVER IRA and want to convert some IRA to ROTH IRA what are rules
First rule is that if you will reach 72 by the end of 2021, you must first withdraw your first RMD from the account before converting and additional amount you wish. SInce you will be taxed on the total of the RMD and the amount converted, and since you are probably also collecting SS benefits, it may not be a good time to convert. On the other hand, if you will not reach 72 by year end, this year is the last year you can convert without having RMDs included in your income.
If your SS income is not already included in your AGI at the max of 85% of SS benefits, a conversion will cause more of your SS to be taxable. You should attain an estimate using a tax program to determine how much the conversion will add to your taxes. Or if you have your taxes done for you, you might wait until after 4/15 and ask your tax preparer to determine how much various conversion amounts will add to your 2021 tax bill. You have all year to convert, but should be careful in doing so because you cannot reverse a conversion if you convert too much. If you do not have a Roth IRA now, you will need to open a Roth IRA account, probably at the same firm that you have your rollover IRA with.
thank you for response. I will not be 72 in 2021 . trying to figure out plan for ROLL OVER IRA. if i slowly convert to ROTH IRA can i pass it through trust to grandchildren?
That’s often a good idea. It lets the trust accumulate the distributions without having to consider the higher income tax rates for trusts.
Bruce Steiner
Permalink Submitted by gautam SHAH on Wed, 2021-03-03 11:43
also what are taxes you have to pay