IRA Rollover Rules and Roth Conversions: Today’s Slott Report Mailbag

Thursday, February 03, 2022

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

I’m retired, over age 59 ½, and want to take a single 401(k) distribution and convert it to my Roth IRA. Do I follow same 60-day rollover rules and first have to rollover the distribution to a Traditional IRA and then convert it, or can I deposit it directly into my Roth IRA?

Thanks

Answer:

There is no requirement to route a 401(k) distribution through a traditional IRA before converting. You can go direct to the Roth IRA. As long as the distribution from the plan is deposited into the Roth IRA within 60 days, this will count as a valid Roth conversion. You will receive a 1099-R from the plan showing the distribution, and you will receive a 5498 from the Roth IRA showing the conversion. (Important: If you are age 72 or older and need to take an RMD from the plan, the RMD must be taken first before any Roth conversion can be done.)

Question:

I did an IRA-to-Roth IRA conversion on Dec 15, 2021. Now the market has dropped. Can I return the Roth conversion to another IRA within 60 days?

Brad

Answer:

Brad,

Your Roth conversion is locked in and there is no way to reverse it. The 60-day rollover rule is not applicable in this situation. In the past there was an option to “recharacterize” a Roth conversion. However, the ability to reverse (recharacterize) a conversion is no longer available.

 

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