tradition to roth IRA rollover

[DOFOSHO]

When rolling over a traditional IRA to a roth IRA, is the tax on the PRINCIPLE or the VALUE being rolled over. Ultimately the question is, does it make sense to roll over a traditional to roth now since the VALUE of my traditional is less than the principle or does it not matter?

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[FutureInternist]

When rolling over a traditional IRA to a roth IRA, is the tax on the PRINCIPLE or the VALUE being rolled over. Ultimately the question is, does it make sense to roll over a traditional to roth now since the VALUE of my traditional is less than the principle or does it not matter?

Value.

When you roll over from trad to Roth, you do have to pay taxes on gains which is a chore to do.

Going forward, try to put the $ into trad IRA on Fri evening, and then rolling over on Sun night so no trading (hence no profit).

Also… Principal

 

[DOFOSHO]

Thank you. Can I do 2 traditional-to-roth roll overs in 1 year; the first would be now, from traditional to roth, and second would be in July, from 403b to traditional to roth?

Also, regarding the friday contribution - sunday roll over, Could I simply contribute 6k in cash to a traditional (without investing) then rollover the cash ?

 

[FutureInternist]

Trad to Roth IRA shouldn’t be a problem as long as its less than or equal to the yearly limit, and you can do this in as many steps as you want.. i.e $500 monthly, $250 every 2 weeks or just the $6K in one shot (which is easier cos you only have to do the Fro-Sun rollover thing once)

From 403b to IRA you WILL have to pay taxes and then after that the sequence is the same (since 403b is pre-tax)
Also these types of rollovers do not count towards your yearly limit.
Although…. Since 403b can be rolled into a 401K (if you happen yo be going from a non-profit to a for profit job), it may be best to just do that & hence not pay any taxes.
If you have a 457b then yes… would convert to Roth IRA (unless perhaps a big down payment on house etc).
I had 75K when I changed jobs… put it all into the house & now have <$200 per month in interest since the balance is so low.

Depends on the company.
Mine forces me to choose an investment plan but there may be ones that do not.

Also, if married, and spouse does not work, can contribute $6K from your income into their IRA…. They will have to set it up themselves but after that you can control with their username & password.

As always, never hurts to call Fidelity etc and ask them same Qs to see what response you get.

 

[mvenus929]

When rolling over a traditional IRA to a roth IRA, is the tax on the PRINCIPLE or the VALUE being rolled over. Ultimately the question is, does it make sense to roll over a traditional to roth now since the VALUE of my traditional is less than the principle or does it not matter?

Depends.

If you contributed post-tax monies to a traditional IRA (for instance, starting to do a backdoor Roth IRA), your contribution is non-taxable, but your gains are taxed like regular income. If you contributed pre-tax monies to a traditional IRA (for instance, rolling over a pre-tax 403b to a traditional IRA to a Roth IRA), your entire rollover is taxed as regular income.

In the former case, rollover now while your value down is beneficial because a greater percentage of your rollover is tax-free. In the latter, it doesn't really matter, except the total amount you're rolling over is lower now than it will be when the market finally starts going up again.

 

[2brads]

Technically, when moving money from traditional IRA to Roth, that is a conversion. Moving money from another vehicle (like a 401k) to an IRA would be a rollover. That being said, you will be exposed to the pro rata IRS rules if you convert some, but not all of your traditional IRA money. The pro rata rules are somewhat complicated and require fastidious record keeping, so if you choose to convert funds to Roth IRA, it is advisable to make sure your traditional IRA balances are zero after you make the conversion - Either through complete conversions to Roth or rollovers into something like a 401k. Any remaining traditional IRA money will make your taxes a nightmare.

It is advisable to perform conversions if: you make too much money to directly contribute to Roth and cannot deduct a traditional IRA contribution OR you are in a low tax bracket, but expect to shortly be in a much higher bracket (I.e. you’re finishing training now) OR you can avoid a tax bracket jump from the conversion.