Archive for the ‘Converting IRA Rules’ Category
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Rules For Converting To Roth Ira
March 30th, 2011
Question: Roth conversion – good option or not?
Hi,
Here is my situation: I’ll be out of US for next 8+ years (may be more) on overseas assignment with family. I have 401K but don’t have Roth IRA.
Can I convert my 401K to Roth IRA based on 2010 Roth conversion rules and save on early withdrawal penalty?
I’m thinking to convert my 401K to Roth IRA and withdraw after 5 yrs (just contributions) to avoid penalty or any tax.
Is this good option? OR is there any way to avoid / reduce my early withdrawal penalty? I might retire outside of US.
Thanks in Advance,
LV
Answer: Depending upon the amount, one decision you have to make for any amount converted in 2010 is whether to pay tax on the conversion in 2010 or whether to pay the tax in 2011 and 2012 (that is a special deal for 2010 only).
Or if the amount is high, you may want to transfer it to an IRA and convert it over a period of years to reduce the percentage of tax. But each conversion has to season for 5 years before you can withdraw that portion without 10% penalty.
Charles Schwab Roth IRA Conversion Q&A: What Are the Major Benefits of Converting to a Roth?
Rules For Converting Traditional Ira To Roth Ira
December 8th, 2010