Comments on: 2010 Conversions to Roth: Six Factors to Consider

By: jblankenship

jblankenship — Sat, 25 Apr 2009 00:44:12 +0000

Glad I could give you a laugh! Have you found any other celebrities hidden throughout the blog?

By: Helen

Helen — Fri, 24 Apr 2009 23:37:50 +0000

As many times as I have thought about post-tax IRA’s, I have never thought of David Lee. Thanks for making me laugh out loud.

By: jblankenship

jblankenship — Fri, 17 Apr 2009 19:55:19 +0000

Yes, good discussion, and I’m glad that you caught that, I’d hate to have misleading info out here.

Sorry it doesn’t work out for you – any chance you could pick up a part-time job with a 401(k), or self-employment where you could set up a solo-K?

By: Rosemary

Rosemary — Fri, 17 Apr 2009 18:45:44 +0000

That is what she told me. I needed another qualified plan. I am not working so I no longer have a 401K. We are 100% in CD’s so I cannot do this. Thank you for your help. I love learning new things. Just wished I could have taken advantage of this. A lot of our CD’s are still earning over 6 1/2%. I cannot cash them in early. Guess I will have to use that horrible formula. An interesting discussion.

By: jblankenship

jblankenship — Fri, 17 Apr 2009 17:48:11 +0000

Okay – I’ve found the answer: the account that you move everything but the nondeductible contributions into can be any account but another IRA. So the amount could be moved into an employer’s 401(k) or other qualified plan.

My apologies for the confusion, and I hope this clears things up. I have adjusted the information presented in the article to reflect the corrected recommendations.

By: jblankenship

jblankenship — Fri, 17 Apr 2009 17:17:54 +0000

Let’s talk about this on the phone – I will be back in my office at approximately 3pm central time, you can call me at 866-374-4203 if you’d like. There must be something about your situation that is unusual, otherwise the IRS person is just completely wrong, because you can do this – unless, as I say, something is unusual about your situation.

By: Rosemary

Rosemary — Fri, 17 Apr 2009 16:48:10 +0000

I just called IRS badge number 0247025 and she said all IRA CD’s would have to be closed to do this, not just one that has over $18,000 in it.

By: jblankenship

jblankenship — Fri, 17 Apr 2009 13:09:51 +0000

As long as you move everything but the $18,000 to another qualified retirement account (other than an IRA) – this is critical. From your wording, it’s not clear that this is what you have in mind.

The reason it can be confusing is because in one IRA account you can hold many different investments – CD’s, mutual funds, money market, bonds, stocks. You need to make sure that you’re moving everything but the nondeductible contributions into another qualified retirement account (other than an IRA) – and it has to go that way, you shouldn’t move the non-deductible contributions to a separate IRA, as then you’d need to wait 12 months before you could do the conversion (you can rollover IRA funds once per 12 months).

Does that clear things up? If not, let me know – we may need to get on the phone to talk it through.

By: Rosemary Shay

Rosemary Shay — Fri, 17 Apr 2009 12:45:17 +0000

Another words if I have $100,000 CD that is due in Jan and I have a basis or non-deductible amount of $18,000, when this CD is due I can put the $18,000 in an IRA savings account and the rest into another traditional IRA CD, and then a few days later convert this $18,000 in the IRA savings to a Roth CD with no tax consequences.

By: jblankenship

jblankenship — Fri, 17 Apr 2009 12:18:15 +0000

Hi, Rosie – yes, that’s correct, unless you move the growth or earnings out of that account prior to the conversion, any earnings on your nondeducted contributions would be taxable upon conversion. The earnings would have to be in a separate account altogether, not just in a different holding (such as a separate CD), as your conversion from any specific IRA is done ratably, as described above.

Hope that helps!