Converting or rolling over IRA / 401(k) to Roth IRA only, business, ordinary, capital, convert

Wasteoftime

Hey guys,

Did any of you convert your IRA / 401(k) to Roth IRA during long periods of no income, i.e. graduate school, business school or unemployment?

I'm wondering if there are any reasons *not* to roll all my other retirement funds to Roth IRA this year. The only months of ordinary income I'm making is during my internship -- three months -- since I don't work during the rest of the school year. Everything else is capital gains (or losses, hopefully not too much though). I expect that my taxes will be lower this year than in other years, but I'm just wondering if I'm overlooking anything obvious.

mdfb79

Regular IRA - Untaxed money going in, removed money taxed at marginal rate

Roth IRA - Taxed money going in, removed money coming out tax-free

It doesn't have anything to do with how much money you're making right now. It should depend on if you think paying the taxes now (roll it into a ROTH) to remove your money later tax-free is worth it. If you plan on retiring in the next 5-8 years it may not be worth it. If you plan to pass it along to an inheritent tax free or work for a while longer then it may be worth it.

It's also going to come down to how much money your IRA may make. Because Roth gains are not taxed under the regular (because you already paid for them), but the regular IRA gains will. So if you think the market is going bull next few years do it. If you think you'll get minimal returns don't. Really you should consult a tax accountant and look at hard numbers. Without more information it's difficult for anyone to suggest.

therecruit

No real reason not to do it. Just remember that you will be on the hook for paying taxes on that as ordinary income in the year that you roll over.

neil1234

Can you roll a regular IRA into a Roth? Plus, I think Numi will be priced out of the Roth IRA pretty quickly. I believe it's under 150k for individuals.

Windjammer

There is a limitation to the amount you can contribute to a ROTH that phases out for high income. Sounds correct. You can roll it though.

jbaldyga

Related question to the tax experts:

Can you have both a Roth and a regular IRA and put the max in both ? I understand that the max for a Roth is 16500 this year and about 6000 for an IRA, can we have both deducted ?

laurab

Max for the Roth is $5000 per year

lucasg85

You can contribute to both, but you can only deduct the traditional IRA, and you have to pay tax on anything that is rolled (you are essentially paying back the tax you deducted earlier when you initially contributed to the traditional).

Numi, if you are planning to make a lot in the future, then it makes sense to roll as much of your traditional to a Roth in a year when you are making little, because 1) you'll be in a lower tax bracket, and 2) you might not get to do it when you are raking in the bux. So if you aren't employed during your MBA, that's a good time to do it.

svgleeson

mo34 Wrote:
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> Related question to the tax experts:
>
> Can you have both a Roth and a regular IRA and put
> the max in both ?

No, under current tax code there's a max total for both

> I understand that the max for a
> Roth is 16500 this year and about 6000 for an IRA,
> can we have both deducted ?

$16,500 is the max for Roth 401(k) and elective deferral cap. That's different from a Roth IRA.

anshultongia

bchadwick Wrote:
-------------------------------------------------------
>
> Numi, if you are planning to make a lot in the
> future, then it makes sense to roll as much of
> your traditional to a Roth in a year when you are
> making little, because 1) you'll be in a lower tax
> bracket, and 2) you might not get to do it when
> you are raking in the bux. So if you aren't
> employed during your MBA, that's a good time to do
> it.


Thanks bchadwick. This answers exactly my question as stated. I appreciate the clarity.