Rollover Ira Convert To Roth
April 3rd, 2008
Question: Are there any tax advantages in converting a rollover IRA into a Roth IRA?
As I understand it, if I convert the rollover into a Roth, I will then have to report the entire amount on my taxes as income the year I do the conversion. So after “x” number of years when I’m ready to start taking money out of my Roth, won’t I get taxed again? Am I setting myself up to let the IRS tax me twice on some of the same money?
Answer: Nope. When you convert it into the Roth, you pay taxes on it. Any distributions you then take from the money that you contributed are then tax free. However, to get tax free distributions on anything that the Roth earns (anything over the contribution amount), you must wait until you are at least 59 1/2 years old. If you withdraw it before then it is taxed as ordinary income and you will incur a 10% penalty.
New Rules, New Options for IRAs
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