IRA Rollover

Posts Tagged ‘ira rollover time limit’

Question: Traditional to Roth IRA Conversions and the 1-year time limit.?

In October 2006 I rolled over my old 401k to a new traditional IRA at Vanguard, where I had an existing roth IRA. This year I wanted to take advantage of my low tax-rate and convert the new traditional/rollover IRA into the existing roth IRA, which I did last month. The people at Vanguard explained to me that this would be a taxable event, without penalty. So can I claim that distribution in my income tax at the end of 2007 and pay the applicable taxes without taking any distributions from the IRA? In addition, I would like to transfer the roth IRA to Fidelity and am wondering if I can do that now or do I have to wait until March 2008?
Thank you for the answers. I want to clarify one point. Since I rolled over from traditional to roth, I need to pay that tax as income but the funds for the tax need not come out of the IRA? Can I pay the tax with other funds? In other words, I don’t need to withdraw funds from the IRA in order to pay the tax if I don’t want to.

Answer: If you converted the IRA in 2007, then you would pay tax next year for 2007 tax year.
If you take any of the IRA money as a distribution, you will pay a 10% penalty on top of the tax, and if you live in a state with income tax, they usually have a penalty besides tax.
You’d need to wait till next year to rollover the IRA again.

Hi Ho Silver interview with James R Cook Investment Rarities