saveforfuture
New Member
Cash: $ 0.65
Posts: 3
Joined: 05 Mar 2005
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| ROTH IRA conversion |
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This is the situation I am in:
I have been working for four years and had about $35,000 in my retirement account. Later this year, I need to quit my job because I am going back to graduate school to finish my Ph.D. degree. I am 30 years
old right now. I know when I quit my job, I can take the money out of the retirement account. Does it make sense for me to put it into a ROTH IRA? When I am in school, I would expect my overall income the lowest, therefore probably in the 15% tax bracket. In my retirement years, it is likely my income would be higher.
Any suggestions? In this situation, do I need to pay ordinary income tax on the money that I want to convert?
Thanks!
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Sat Mar 05, 2005 8:03 pm |
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David Briggs
Senior Member
Cash: $ 57.86
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Joined: 16 Jan 2005
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When my big corporate job ended and I had 401k money (is that what you have?) an individual IRA rollover account is the vehicle I chose, and I have been completely satisfied with that decision ever since, going on 4 years now. Do you need a recommendation as to who should be the receiving institution for an IRA rollover account? The recommendation roster is now open! Chime in everyone!
~~David
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Sun Mar 06, 2005 1:14 am |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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In order to affect this transaction - from a qualified account to a Roth IRA - you would first need to roll over the qualified account to a traditional IRA. Then you can make the rollover into the Roth account. Usually there is a one-year waiting period after making a rollover into an IRA (trad), but it is waived in this case. Your MAGI for the year in which the rollover to the Roth occurs must be less than $100,000, and you'll of course be taxed on the amount as ordinary income.
At least that's the way I read the law on it - if there's a CPA or someone else out there that reads it differently, please comment.
Hope this helps -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Sun Mar 06, 2005 11:43 pm |
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saveforfuture
New Member
Cash: $ 0.65
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Joined: 05 Mar 2005
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Thanks David and Jim,
Your replies are very helpful! I would very much like to hear your recommendation of a good institution where I roll my money into...
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Mon Mar 07, 2005 3:39 pm |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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That's a very wide open field. There are many low-cost providers out there, so you have many to choose from.
Two examples that I use to direct clients into are Vanguard and Ameritrade. I typically recommend Vanguard for someone who is dollar-cost-averaging into Vanguard index funds (or other Vanguard funds), and Ameritrade for investing that's more complex or purely lump-sum investments. Both provide good service for very low costs.
These are only a couple of examples, and I know that the rest of the money-talk community has other favorites to recommend.
Hope this helps -
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Mon Mar 07, 2005 4:09 pm |
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saveforfuture
New Member
Cash: $ 0.65
Posts: 3
Joined: 05 Mar 2005
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Thanks Jim,
Right now most of my retirement money is with Vanguard. I have had good experiences with Vanguard. A follow-up question I have is: can I have two ROTH accounts at different institution? Besides the 403(a) and 403(b), I also have a ROTH account with Sharebuilder where I put $3000 each year.
Can I have a ROTH account with Vanguard and still keep the old ROTH account with Sharebuilder?
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Mon Mar 07, 2005 6:48 pm |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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Yes, you can open as many Roths as you can stand. At some point you may wish to consolidate the accounts for simplicity, but there's nothing wrong with having more than one account. You can only contribute up to the max for the given year across all accounts, no matter how many accounts you have. 
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Mon Mar 07, 2005 7:02 pm |
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