IRA

[Happy prose]

Hi, in order to open an IRA, do I have to still be working? I wanted to try theRoth conversion, but I am already retired. I have a pension income, but nothing else. Did I miss the boat? 

[TheOtherMe]

You have to have earned income.  Pension income is not earned income.

[minnesotapaintlady]

Feb 18, 2024 12:19:13 GMT -5 TheOtherMe said:

You have to have earned income.  Pension income is not earned income.

She can still open a Roth IRA though and use it for conversions.  She just can't make direct contributions.

[busymom]

I don't know your personal story Happy prose.  Do you have a husband who is still working?  That's one way you could still contribute to an IRA.

[minnesotapaintlady]

There is no earned income requirement for conversions or opening a Roth.  I'm not sure if you're with Fidelity or Vanguard, but both of those will just create the Roth account for you if you don't already have one when you request a conversion.

[Happy prose]

Feb 18, 2024 15:08:27 GMT -5 busymom said:

I don't know your personal story Happy prose .  Do you have a husband who is still working?  That's one way you could still contribute to an IRA.

Thank you. My husband is also retired.

[Happy prose]

Feb 18, 2024 15:22:37 GMT -5 minnesotapaintlady said:

There is no earned income requirement for conversions or opening a Roth.  I'm not sure if you're with Fidelity or Vanguard, but both of those will just create the Roth account for you if you don't already have one when you request a conversion.

I have Roths with Vanguard, and a regular brokerage account. No IRA. I also have a 457 through former job, with Nationwide. I have too much cash in a savings account, and was hoping to somehow get it to a Roth. Looks like I'm outta luck on that!

[minnesotapaintlady]

Feb 18, 2024 17:05:27 GMT -5 Happy prose said:

Feb 18, 2024 15:22:37 GMT -5 minnesotapaintlady said:

There is no earned income requirement for conversions or opening a Roth.  I'm not sure if you're with Fidelity or Vanguard, but both of those will just create the Roth account for you if you don't already have one when you request a conversion.

I have Roths with Vanguard, and a regular brokerage account. No IRA. I also have a 457 through former job, with Nationwide. I have too much cash in a savings account, and was hoping to somehow get it to a Roth. Looks like I'm outta luck on that!

Yeah, can't convert cash.  You can roll the 457 into an IRA and do conversions with that.

[Happy prose]

Feb 18, 2024 18:19:35 GMT -5 minnesotapaintlady said:

Feb 18, 2024 17:05:27 GMT -5 Happy prose said:

I have Roths with Vanguard, and a regular brokerage account. No IRA. I also have a 457 through former job, with Nationwide. I have too much cash in a savings account, and was hoping to somehow get it to a Roth. Looks like I'm outta luck on that!

Yeah, can't convert cash.  You can roll the 457 into an IRA and do conversions with that.

So I can open an IRA with cash rolled from 457? I don't currently have IRA.

[minnesotapaintlady]

Feb 18, 2024 18:37:49 GMT -5 Happy prose said:

Feb 18, 2024 18:19:35 GMT -5 minnesotapaintlady said:

Yeah, can't convert cash.  You can roll the 457 into an IRA and do conversions with that.

So I can open an IRA with cash rolled from 457? I don't currently have IRA.

If your plan allows, you can roll the entire 457 into an IRA (called a Rollover IRA).  Then convert whatever you want from there. 

[bean29]

I thought if you already have an IRA everything in the IRA has to be converted to a Roth IRA at the same time. I had rolled over a pension and prior employer 401K to a Vanguard IRA. It now has $200,000 in it. Converting it would create a large tax bill. My DH does not have an IRA so I plan to do rollover roths for him.

[jerseygirl]

Feb 22, 2024 4:49:23 GMT -5 bean29 said:

I thought if you already have an IRA everything in the IRA has to be converted to a Roth IRA at the same time. I had rolled over a pension and prior employer 401K to a Vanguard IRA. It now has $200,000 in it. Converting it would create a large tax bill. My DH does not have an IRA so I plan to do rollover roths for him.

No a portion can be rolled to a Roth . Don’t need to do entire tIRA to Roth

[minnesotapaintlady]

Feb 22, 2024 4:49:23 GMT -5 bean29 said:

I thought if you already have an IRA everything in the IRA has to be converted to a Roth IRA at the same time. I had rolled over a pension and prior employer 401K to a Vanguard IRA. It now has $200,000 in it. Converting it would create a large tax bill. My DH does not have an IRA so I plan to do rollover roths for him.

No, you don't have to convert everything.  You're thinking of when people do Backdoor Roth contributions which is different. Even then you don't HAVE to convert everything, but if you don't it's messy because of the pro-rata rules with the earnings on the withdrawal.  Basically, you stick 7K of after tax money into your traditional with pre-tax, go to convert just 7K of it to Roth and have to pay tax on a percentage of the entire accounts earnings to do so.  Then you forever have to track the after tax contributions vs the pre-tax contributions.  It's highly recommended to avoid that mess by either converting the entire thing and being done or rolling the IRA into a 401K or something so you don't have any pre-tax IRA money before backdoor conversions.

But if you just have a Traditional IRA you can go convert whatever amount of it you want whenever you want.

[CCL]

Feb 22, 2024 4:49:23 GMT -5 bean29 said:

I thought if you already have an IRA everything in the IRA has to be converted to a Roth IRA at the same time. I had rolled over a pension and prior employer 401K to a Vanguard IRA. It now has $200,000 in it. Converting it would create a large tax bill. My DH does not have an IRA so I plan to do rollover roths for him.

Nope. I do it 3 or 4 times every year.

[bean29]

Feb 22, 2024 8:28:32 GMT -5 minnesotapaintlady said:

Feb 22, 2024 4:49:23 GMT -5 bean29 said:

I thought if you already have an IRA everything in the IRA has to be converted to a Roth IRA at the same time. I had rolled over a pension and prior employer 401K to a Vanguard IRA. It now has $200,000 in it. Converting it would create a large tax bill. My DH does not have an IRA so I plan to do rollover roths for him.

No, you don't have to convert everything.  You're thinking of when people do Backdoor Roth contributions which is different. Even then you don't HAVE to convert everything, but if you don't it's messy because of the pro-rata rules with the earnings on the withdrawal.  Basically, you stick 7K of after tax money into your traditional with pre-tax, go to convert just 7K of it to Roth and have to pay tax on a percentage of the entire accounts earnings to do so.  Then you forever have to track the after tax contributions vs the pre-tax contributions.  It's highly recommended to avoid that mess by either converting the entire thing and being done or rolling the IRA into a 401K or something so you don't have any pre-tax IRA money before backdoor conversions.

But if you just have a Traditional IRA you can go convert whatever amount of it you want whenever you want.

So I could roll my IRA into my workplace 401K?  I still couldn't do back door Roths though b/c my work doesn't offer it.  I can create the option for DH though b/c he is self-employed.  So, I have to get my taxes done before 4/15/2024 (I usually go on extension).

[minnesotapaintlady]

Feb 22, 2024 16:24:35 GMT -5 bean29 said:

Feb 22, 2024 8:28:32 GMT -5 minnesotapaintlady said:

No, you don't have to convert everything.  You're thinking of when people do Backdoor Roth contributions which is different. Even then you don't HAVE to convert everything, but if you don't it's messy because of the pro-rata rules with the earnings on the withdrawal.  Basically, you stick 7K of after tax money into your traditional with pre-tax, go to convert just 7K of it to Roth and have to pay tax on a percentage of the entire accounts earnings to do so.  Then you forever have to track the after tax contributions vs the pre-tax contributions.  It's highly recommended to avoid that mess by either converting the entire thing and being done or rolling the IRA into a 401K or something so you don't have any pre-tax IRA money before backdoor conversions.

But if you just have a Traditional IRA you can go convert whatever amount of it you want whenever you want.

So I could roll my IRA into my workplace 401K?  I still couldn't do back door Roths though b/c my work doesn't offer it.  I can create the option for DH though b/c he is self-employed.  So, I have to get my taxes done before 4/15/2024 (I usually go on extension).

If your workplace 401K accepts rollovers. Most do, but I won't say all.  You're thinking mega-backdoor Roth when you're talking workplace plans where you contribute a bunch post tax, then roll it to Roth 401K (or out into Roth IRA if they allowed that).  

But, if you rolled your IRA into your 401K you could still do backdoor Roth IRA contributions. It would just be limited to the 7K/year limit (8K for over 50).

[bean29]

MPL is there an income limit on backdoor Roth IRA’s? I am thinking our income was too high.

[minnesotapaintlady]

Feb 23, 2024 7:11:25 GMT -5 bean29 said:

MPL is there an income limit on backdoor Roth IRA’s? I am thinking our income was too high.

No.  There's an income limit for Roth IRAs which is why people backdoor them.

There is no income limit to contribute to a non-deductible Traditional IRA, so you can contribute to one of those and immediately convert it to Roth.